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Oklahoma Gas & Electric Company uses AI to assess and repair distribution pole damage

PR Newswire

OKLAHOMA CITY, Aug. 4, 2021 /PRNewswire/ — Gas & Electric Company (“OG&E”), a subsidiary of OGE Energy Corp. (NYSE: OGE), today announced it begins a pilot program that uses artificial intelligence (“AI”) to help reduce outages caused by equipment failures. As part of its grid enhancement program, OG&E will leverage collaborative AI-powered image recognition technology that enables engineers to complete distribution pole inspections with greater accuracy and helps to reduce manual review of images.

TRC Companies, an engineering and digitally focused consulting firm with expertise in IT/OT solutions, will provide overall program management for the pilot. eSmart Systems will provide the advanced technology used during the pilot, including a best practice called Collaborative AI, with their Grid Vision® solution. The solution is designed to analyze photographic images of distribution poles to identify defects, catalog asset inventory and identify risk issues that need to be addressed to better maintain reliability. The solution is expected to accelerate image analysis and improve the inspection process, while increasing efficiency, improving safety, and enhancing overall reliability. The program will initially focus on woodpecker damage as a specific use case. Woodpeckers can and do cause considerable damage to wooden distribution/power poles in a short period of time and this technology allows OG&E to better respond to deterioration and utilize a consistent approach for repairs and replacements.

“We have been excited about eSmart since hearing about them through our partnership with Energy Impact Partners (EIP). Utilizing cutting-edge technology in the form of AI to inspect our distribution poles makes our electric grid smarter, improves our business processes and helps to keep the lights on for our customers,” said Zac Gladhill, Director of Grid Integration and Innovation for OG&E. “We anticipate this technology will reduce the amount of time our engineers spend sifting through photographs of poles and “triaging” potential damage. We currently anticipate applying the technology to identify additional uses in our transmission and distribution network if the pilot meets performance objectives.”

“Helping our clients integrate and fully leverage these types of advanced technologies is at the core of what we do in digital at TRC. The ability to utilize our expertise in grid enhancement to combine technology with solving clients’ issues in new and innovative ways is just one way we are expanding capabilities for our clients,” said Ryan Renner, TRC’s President, Digital Solutions.

“We are excited to be partnering with OG&E and TRC to develop a solution that will help to improve the inspection process, increase efficiency, and improve safety,” said Knut Johansen, CEO of eSmart Systems.

OG&E’s Grid Enhancement Plan is designed to provide present and future benefits to its customers and stakeholders by focusing on the needed replacement and upgrade of equipment, while also including the installation of new technology and communications systems. The pilot program with eSmart Systems and TRC has the potential to advance the technology used by OG&E in the future and transform the way damage is assessed for years to come.

Click HERE to learn more about OG&E’s Grid Enhancement Plan.

About TRC Companies

Groundbreaker. Game changer. Innovator. TRC is a global firm providing environmentally focused and digitally powered solutions that address local needs. For more than 50 years, we have set the bar for clients who require consulting, construction, engineering, and management services, combining science with the latest technology to devise solutions that stand the test of time. TRC’s nearly 6,000 professionals serve a broad range of public and private clients, steering complex projects from conception to completion to help solve the toughest challenges. We break through barriers for our clients and help them follow through for sustainable results. TRC is ranked #20 on ENR’s list of the Top 500 Design Firms in the United States. Learn more at TRCcompanies.com and follow us on Twitter, LinkedIn and Facebook.

About eSmart Systems

eSmart Systems is a leading provider of AI-powered solutions for the inspection and maintenance of critical infrastructure. With our software solution, Grid Vision®, we revolutionize how Power Utilities operate and maintain their transmission and distribution networks. eSmart Systems offers a data-driven and condition-based approach to infrastructure inspections that can be managed from one single platform. This platform also employs Collaborative AI, a method for combing the best qualities of Machine Learning and Subject Matter Experts to achieve the best near-term inspection outcome, while also automatically training the AI for long-term success. We support companies worldwide by ensuring reduced costs, safer inspections, and prolonged asset life. For more information, please visit www.esmartsystems.com.

About OG&E

Oklahoma Gas and Electric Company, a subsidiary of OGE Energy Corp. (NYSE: OGE), is Oklahoma’s largest electric utility. For more than a century, we have provided customers in Oklahoma and western Arkansas the safe, reliable electricity needed to power their businesses and homes with the nation’s lowest electric rates, according to S&P Global Market Intelligence. Our employees are committed to generating and delivering electricity, protecting the environment, and providing excellent service to nearly 871,000 customers. OG&E has 7,081 MW of electric generation capacity fueled by low-sulfur coal, natural gas, wind, and solar. OG&E employees live, work, and volunteer in the communities we serve. For more information about OG&E, visit us at OGE.com or follow us on Facebook, Twitter and Instagram.

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SOURCE OGE Energy Corp.

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NexTier Announces Agreement to Acquire Alamo Pressure Pumping

PR Newswire

HOUSTON, Aug. 4, 2021 /PRNewswire/ — NexTier Oilfield Solutions Inc. (NYSE: NEX) (“NexTier” or the “Company”) today announced that it has reached an agreement to acquire 100% of the ownership interests of Alamo Pressure Pumping, LLC (“Alamo“) for a transaction valuation of approximately $268 million, as further described below. The transaction is expected to be completed by August 31, 2021, subject to customary closing conditions and approvals.

Consolidating 2 leading providers of low carbon well completion solutions in the Permian Basin

  • Adds 9 highly utilized, primarily CAT Tier IV, young hydraulic fracturing fleets to NexTier’s asset base
  • Fortifies NexTier as the leader in CAT Tier IV Dual Fuel technology
  • Enables accelerated access to tight and growing next generation market without adding market capacity
  • Accelerates path to positive free cash flow generation at attractive purchase multiple
  • Expects to capture minimum $10 million annualized cost synergies within 6 months of closing
  • Provides significant pull-through opportunities via established integrated completions offering
  • Maintains strong and flexible balance sheet with $272 million estimated pro-forma liquidity and no near-term debt maturities
  • Retains Alamo’s key leadership & current operational teams intact with Alamo CEO reporting directly to NexTier CEO
  • Aligns with low-cost, low-carbon ESG strategy and advances NexTier’s sustainability journey

Management Commentary

“The acquisition of Alamo accelerates and magnifies the impact of our next generation technology strategy, providing NexTier with significant opportunities for deploying gas-powered equipment and complimentary integrated solutions into a market with high and increasing demand,” said Robert Drummond, President & Chief Executive Officer of NexTier. “Combined, we will operate the third largest base of active hydraulic horsepower across the U.S. and the largest base of next generation equipment in the Permian, improving our scale with highly-utilized fleets for an efficient customer base. We are impressed with Alamo’s performance and their successful track record in the Midland basin. Therefore, other than enhancement by our last-mile logistics, NexHub and digital tools, operational integration will be minimal. Joe McKie, the Alamo President and CEO, will continue to lead the Alamo division of NexTier and report directly to me.”

“NexTier remains focused on maintaining a strong financial position with attractive cash, liquidity, and leverage positions,” said Kenny Pucheu, Executive Vice President and Chief Financial Officer of NexTier. “Today’s acquisition accelerates our path to free cash flow generation in early 2022. With no near-term debt maturities, we expect to drive cash flow back onto the balance sheet through expanded Tier IV Dual Fuel capacity and anticipated higher utilization.  This transaction is a win-win, as it immediately expands our gas-powered equipment capacity, accelerating speed to market by avoiding the significant time lag associated with organically growing our low carbon fleet, with added benefit of not increasing market capacity. In sum, we are acquiring a highly utilized base of next generation equipment at an attractive relative valuation, upholding our commitment to delivering value to shareholders.”

Alamo Pressure Pumping Overview

Alamo, founded in 2017 and headquartered in Midland, Texas, is a leading Permian pressure pumper based on next generation horsepower and active fleets. Acquired assets include 9 hydraulic fracturing fleets comprised of 460,000 horsepower, approximately 92% of which is Tier IV DGB capable. Alamo operates exclusively in the Permian Basin and primarily out of Midland. Alamo achieved $68 million of EBITDA in 2020i.

Transaction Details

The transaction valuation is approximately $268 million, which includes (i) cash consideration of $100 million (ii) the issuance of 26 million shares of NexTier’s common stock, (iii) the assumption by the Company of certain existing liabilities, including $38 million of equipment obligations, and (iv) $30 million of post-closing services to be provided to Alamo E&P. The Purchase Agreement also provides for (a) potential earn-out payments, payable in the event Alamo achieves certain EBITDA levels through year-end 2022, (b) Tier II equipment upgrade payments (determinable following completion of upgrades), and (c) various purchase price adjustments. The common stock issuable as part of the closing reflects an ownership by sellers of approximately 10.7% of the pro-forma Company, and is subject to certain lock-up provisions.

The transaction valuation of approximately $268 million reflects approximately $582 per horsepower for 460,000 horsepower of primarily next-gen equipment. In addition, assuming $80 million of Alamo achieved EBITDA in 2022i, reflecting the threshold for earn-out payments to occur, the transaction valuation reflects an estimated multiple of approximately 3.4x.

For further details on the transaction terms, see NexTier’s Current Report on Form 8-K filed today with the SEC.

Transaction & Combined Company Highlights

Combined, NexTier will own 46 hydraulic fracturing fleets totaling approximately 2.5 million horsepower, with the largest deployed fleet capable of being fueled by low-emission natural gas in the market today. The addition of Alamo’s highly utilized next generation focused fleets fortifies NexTier’s leadership position in this market niche where demand continues to outpace supply.

Alamo’s focus on the Midland Basin is highly complementary to NexTier’s significant position in the Delaware Basin, providing intra-basin diversification and establishing NexTier as a leading completions provider in one of the most prolific basins in the world. On a combined basis, NexTier expects to operate 17 hydraulic fracturing fleets in the Permian Basin post-closing.

The Company forecasts $10 million of annualized cost synergies to be achieved within 6 months of transaction closing. Alamo’s CAT Tier IV equipment, streamlined operations, and single-basin focus are highly compatible with NexTier and allows for seamless integration into NexTier’s platform. Alamo has a highly complementary customer base with limited overlap, enabling the expansion of NexTier’s integrated completions solutions. Pro-forma for the closing cash portion of the purchase price, NexTier maintains a strong balance sheet position, including estimated $272 million of total liquidity as of June 30, 2021, comprised of $250.4 million in cash plus $121.6 million of availability under our ABL credit facility as of June 30, 2021, less the $100 million in cash to be paid at closing, and no near-term debt maturities.

Advisors

King & Spalding LLP is serving as NexTier’s legal advisor, while Piper Sandler & Co. is serving as its financial advisor. Kirkland & Ellis LLP is serving as legal advisor to Alamo.

About NexTier Oilfield Solutions

Headquartered in Houston, Texas, NexTier is an industry-leading U.S. land oilfield service company, with a diverse set of well completion and production services across the most active and demanding basins.  Our integrated solutions approach delivers efficiency today, and our ongoing commitment to innovation helps our customers better address what is coming next.  NexTier is differentiated through four points of distinction, including safety performance, efficiency, partnership and innovation.  At NexTier, we believe in living our core values from the basin to the boardroom, and helping customers win by safely unlocking affordable, reliable and plentiful sources of energy.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1993, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Where a forward-looking statement expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. The words “believe,” “continue,” “could,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “should,” “may,” “will,” “would” or the negative thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control. Statements in this press release regarding NexTier, Alamo and the combined company that are forward-looking, including projections as to the Company’s 2021 guidance and outlook information,  projections as to the anticipated benefits of the proposed transaction, the impact of the proposed transaction on NexTier’s and Alamo’s business and future financial and operating results, the amount and timing of synergies from the proposed transaction, and the closing date for the proposed transaction, are based on management’s estimates, assumptions and projections, and are subject to significant uncertainties and other factors, many of which are beyond NexTier’s and Alamo’s control. These factors and risks include, but are not limited to, (i) the competitive nature of the industry in which NexTier and Alamo conduct their business, including pricing pressures; (ii) the ability to meet rapid demand shifts; (iii) the impact of pipeline capacity constraints and adverse weather conditions in oil or gas producing regions; (iv) the ability to obtain or renew customer contracts and changes in customer requirements in the markets NexTier and Alamo serve; (v) the ability to identify, effect and integrate acquisitions, joint ventures or other transactions; (vi) the ability to protect and enforce intellectual property rights; (vii) the effect of environmental and other governmental regulations on NexTier and Alamo operations; (viii) the effect of a loss of, or interruption in operations of, one or more key suppliers, including resulting from inflation, COVID-19 resurgence, product defects, recalls or suspensions; (ix) the variability of crude oil and natural gas commodity prices; (x) the market price (including inflation) and availability of materials or equipment; (xi) the ability to obtain permits, approvals and authorizations from governmental and third parties; (xii) NexTier’s and Alamo’s ability to employ a sufficient number of skilled and qualified workers; (xiii) the level of, and obligations associated with, NexTier’s and Alamo’s indebtedness; (xiv) fluctuations in the market price of NexTier’s stock; (xv) the duration (including resurgences), impact and severity of the COVID-19 pandemic and the response thereto, including the impact of social distancing, shelter-in-place or shutdowns of non-essential businesses and similar measures imposed or undertaken by governments, private businesses or others, and the possibility of increased inflation, travel restrictions, lodging shortages or other macro-economic challenges as the economy emerges from the COVID-19 pandemic; and (xv) other risk factors and additional information. In addition, material risks that could cause actual results to differ from forward-looking statements include: the inherent uncertainty associated with financial or other projections; the effective integration of Alamo’s businesses and the ability to achieve the anticipated synergies and value-creation contemplated by the proposed transaction; and the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all and the failure of the transaction to close for any other reason; the risk that a consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response or retention of customers and vendors as a result of the announcement and/or closing of the transaction; and the diversion of management time on transaction-related issues. In addition, material risks that could cause actual results to differ from forward-looking statements include: the inherent uncertainty associated with financial or other projections; the effective integration of Alamo’s businesses and the ability to achieve the anticipated synergies and value-creation contemplated by the proposed transaction; and the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all and the failure of the transaction to close for any other reason; the risk that a consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response or retention of customers and vendors as a result of the announcement and/or closing of the transaction; and the diversion of management time on transaction-related issues. For a more detailed discussion of such risks and other factors, see the Company’s filings with the Securities and Exchange Commission (the “SEC”), including under the heading “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, available on the SEC website or www.NexTierOFS.com. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates, to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement.

Investor Contact:

Kenneth Pucheu

Executive Vice President – Chief Financial Officer

Marc Silverberg

Partner (ICR)
[email protected]

i Non-GAAP Financial Measures. This presentation makes reference to earnings before interest, income taxes, depreciation and amortization (EBITDA) in relation to the business NexTier is acquiring (Alamo). Alamo historical financial information: Audited 2020 consolidated financial statements were provided by seller as part of the transaction’s diligence. While these financials were prepared on a consolidated basis with the exploration and production business of the seller, EBITDA as to Alamo refers only to the pressure pumping business that NexTier is acquiring. References to Alamo Achieved EBITDA in relation to discussions on earn-out, is referring to Achieved EBITDA as defined in the purchase agreement and related transaction documents. Reconciliations of forward-looking non-GAAP financial measures to comparable GAAP measures are not available due to the challenges and impracticability with estimating some of the items, particularly with estimates for certain contingent liabilities, and estimating non-cash unrealized fair value losses and gains which are subject to market variability and therefore a reconciliation is not available without unreasonable effort.

 

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SOURCE NexTier Oilfield Solutions

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QuinStreet Reports Fiscal Fourth Quarter and 2021 Results

– Record FYQ4 revenue of $151 million, growth accelerates to 29%

– FYQ4 revenue growth excluding divested businesses accelerates to 47%

– Grows net income 151%, adjusted EBITDA 71% in FYQ4

– Momentum and strong performance expected to continue in FY22

PR Newswire

FOSTER CITY, Calif., Aug. 4, 2021 /PRNewswire/ — QuinStreet, Inc. (Nasdaq: QNST), a leader in performance marketplaces and technologies for the financial services and home services industries, today announced financial results for the fiscal fourth quarter and full year ended June 30, 2021.

For the fourth quarter, the Company reported revenue of $151.2 million. Revenue excluding divested businesses grew 47% year-over-year.

GAAP net income for the fourth quarter was $3.8 million, or $0.07 per diluted share. Adjusted net income was $9.6 million, or $0.17 per diluted share.

Adjusted EBITDA for the fourth quarter grew 71% year-over-year to $14.3 million.

For fiscal year 2021, the Company reported revenue of $578.5 million. Revenue excluding divested businesses grew 36% year-over-year.

GAAP net income for fiscal year 2021 was $24.0 million, or $0.43 per diluted share. Adjusted net income was $36.4 million, or $0.66 per diluted share.

Adjusted EBITDA for fiscal year 2021 grew 44% year-over-year to $52.3 million.

For the fiscal year, the Company generated $50.6 million in operating cash flow and closed the year with $110.3 million in cash and equivalents.

“Revenue growth again accelerated in fiscal Q4 due to continued strong results in Insurance and Home Services, and a return to growth in credit-driven client verticals. We also continued to make excellent progress with growth initiatives,” commented Doug Valenti, QuinStreet CEO.

“We expect the strong business momentum and performance to continue in fiscal Q1 and fiscal year 2022, with continued double-digit organic revenue growth. As a reminder, we lapped the Modernize acquisition on July 1. Revenue in the September quarter, our fiscal Q1, is expected to be between $150 and $155 million, seasonally consistent with last quarter’s outperformance and representing 20% year-over-year growth excluding divested businesses at the midpoint of the range. We expect fiscal Q1 adjusted EBITDA to be between $13.0 and $13.5 million. Revenue for fiscal year 2022 is expected to be between $635 and $665 million, representing 15% year-over-year growth excluding divested businesses at the midpoint of the range. We expect fiscal year 2022 adjusted EBITDA to be between $63.5 and $66.5 million, representing growth of about 25% at the midpoint of the range and another year of margin expansion,” concluded Valenti.


Conference Call Today at 2:00 p.m. PT

The Company will host a conference call and corresponding live webcast at 2:00 p.m. PT. To access the conference call dial +1 800-367-2403 (domestic) or +1 334-777-6978 (international callers) using passcode #6068023. A replay of the conference call will be available beginning approximately two hours after the completion of the call by dialing  +1 888-203-1112 (domestic) or +1 719-457-0820 (international callers) and using passcode #6068023. The webcast of the conference call will be available live and via replay on the investor relations section of the Company’s website at http://investor.quinstreet.com. 


About QuinStreet

QuinStreet, Inc. (Nasdaq: QNST) is a leader in performance marketplaces and technologies for the financial services and home services industries. QuinStreet is a pioneer in delivering online marketplace solutions to match searchers with brands in digital media, and is committed to providing consumers with the information and tools they need to research, find and select the products and brands that meet their needs.  


Non-GAAP Financial Measures and Definitions of Client Verticals

This release and the accompanying tables include a discussion of adjusted EBITDA, adjusted net income, adjusted diluted net income per share and free cash flow and normalized free cash flow, all of which are non-GAAP financial measures that are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The term “adjusted EBITDA” refers to a financial measure that we define as net income less provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, interest and other expense, net, acquisition and divestiture costs, gain on divestitures of businesses, net, strategic review costs, contingent consideration adjustment, litigation settlement expense, tax settlement expense, and restructuring costs. The term “adjusted net income” refers to a financial measure that we define as net income adjusted for amortization expense, stock-based compensation expense, acquisition and divestiture costs, gain on divestitures of businesses, net, strategic review costs, contingent consideration adjustment, litigation settlement expense, tax settlement expense, and restructuring costs, net of estimated taxes. The term “adjusted diluted net income per share” refers to a financial measure that we define as adjusted net income divided by weighted average diluted shares outstanding. The term “free cash flow” refers to a financial measure that we define as net cash provided by operating activities, less capital expenditures and internal software development costs. The term “normalized free cash flow” refers to free cash flow less changes in operating assets and liabilities. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, our definition of adjusted EBITDA, adjusted net income, adjusted diluted net income per share and free cash flow and normalized free cash flow may not be comparable to the definitions as reported by other companies.

We believe adjusted EBITDA, adjusted net income and adjusted diluted net income per share are relevant and useful information because they provide us and investors with additional measurements to analyze the Company’s operating performance.

Adjusted EBITDA is useful to us and investors because (i) we seek to manage our business to a level of adjusted EBITDA as a percentage of net revenue, (ii) it is used internally by us for planning purposes, including preparation of internal budgets; to allocate resources; to evaluate the effectiveness of operational strategies and capital expenditures as well as the capacity to service debt, (iii) it is a key basis upon which we assess our operating performance, (iv) it is one of the primary metrics investors use in evaluating Internet marketing companies, (v) it is a factor in determining compensation, (vi) it is an element of certain financial covenants under our historical borrowing arrangements, and (vii) it is a factor that assists investors in the analysis of ongoing operating trends. In addition, we believe adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties in our industry as a measure of financial performance, debt-service capabilities and as a metric for analyzing company valuations.

We use adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact of changes in effective tax rates or fluctuations in permanent differences or discrete quarterly items), non-recurring charges, certain other items that we do not believe are indicative of core operating activities (such as litigation settlement expense, tax settlement expense, acquisition and divestiture costs, gain or loss on divestitures of businesses, contingent consideration adjustment, strategic review costs, restructuring costs and other income and expense) and the non-cash impact of depreciation expense, amortization expense and stock-based compensation expense.

With respect to our adjusted EBITDA guidance, the Company is not able to provide a quantitative reconciliation without unreasonable efforts to the most directly comparable GAAP financial measure due to the high variability, complexity and low visibility with respect to certain items such as taxes, and income and expense from changes in fair value of contingent consideration from acquisitions. We expect the variability of these items to have a potentially unpredictable and potentially significant impact on future GAAP financial results, and, as such, we also believe that any reconciliations provided would imply a degree of precision that would be confusing or misleading to investors.

Adjusted net income and adjusted diluted net income per share are useful to us and investors because they present an additional measurement of our financial performance, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the impact of certain non-cash expenses (stock-based compensation, amortization of intangible assets, and contingent consideration adjustment), non-recurring charges and certain other items that we do not believe are indicative of core operating activities. We believe that analysts and investors use adjusted net income and adjusted diluted net income per share as supplemental measures to evaluate the overall operating performance of companies in our industry.

Free cash flow is useful to investors and us because it represents the cash that our business generates from operations, before taking into account cash movements that are non-operational, and is a metric commonly used in our industry to understand the underlying cash generating capacity of a company’s financial model. Normalized free cash flow is useful as it removes the fluctuations in operating assets and liabilities that occur in any given quarter due to the timing of payments and cash receipts and therefore helps investors understand the underlying cash flow of the business as a quarterly metric and the cash flow generation potential of the business model. We believe that analysts and investors use free cash flow multiples as a metric for analyzing company valuations in our industry.

We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. A reconciliation of these non-GAAP measures to GAAP is provided in the accompanying tables.

FY2020 results in our Education Client Vertical include revenue from US, (historically) Brazil, and India. Revenue in our Financial Services Client Vertical includes Auto Insurance (auto, home, motorcycle, and small business), Life Insurance, Health Insurance, Personal Loans, Credit Cards, Banking, and (historically) Mortgage. Revenue in our Other Client Vertical includes Home Services and (historically) B2B. In fiscal Q3 2020, we divested our B2B client vertical and Brazil operations. In fiscal Q4 2020, we divested our Mortgage business. In fiscal Q1 2021, we divested our Education business.


Legal Notice Regarding Forward Looking Statements

This press release and its attachments contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. Words such as “estimate”, “will”, “believe”, “expect”, “intend”, “outlook”, “potential”, “promises” and similar expressions are intended to identify forward-looking statements. These forward-looking statements include the statements in quotations from management in this press release, as well as any statements regarding the Company’s anticipated financial results, growth and strategic and operational plans. The Company’s actual results may differ materially from those anticipated in these forward-looking statements. Factors that may contribute to such differences include, but are not limited to: the Company’s ability to maintain and increase client marketing spend; the Company’s ability, whether within or outside the Company’s control, to maintain and increase the number of visitors to its websites and to convert those visitors and those to its third-party publishers’ websites into client prospects in a cost-effective manner; the Company’s exposure to data privacy and security risks; the impact from risks and uncertainties relating to the COVID-19 pandemic and its aftermath; the impact of changes in industry standards and government regulation including, but not limited to investigation or enforcement activities of the Federal Trade Commission and other regulatory agencies; the impact of changes in our business, our industry, and the current economic and regulatory climate on the Company’s quarterly and annual results of operations; the Company’s ability to compete effectively against others in the online marketing and media industry both for client budget and access to third-party media; the Company’s ability to protect our intellectual property rights; and the impact from risks relating to counterparties on the Company’s business. More information about potential factors that could affect the Company’s business and financial results are contained in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission (“SEC”). Additional information will also be set forth in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2021, which will be filed with the SEC. The Company does not intend and undertakes no duty to release publicly any updates or revisions to any forward-looking statements contained herein.


Investor Contact:
 
Hayden Blair
(650) 578-7824
[email protected]

 


QUINSTREET, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands)


(Unaudited)


June 30,


June 30,


2021


2020


Assets

Current assets:

Cash and cash equivalents

$

110,318

$

107,509

Accounts receivable, net

87,928

64,472

Prepaid expenses and other assets

7,932

13,591

Total current assets

206,178

185,572

Property and equipment, net

6,849

5,657

Operating lease right-of-use assets

10,983

9,118

Goodwill

117,833

80,677

Other intangible assets, net

59,177

28,174

Deferred tax assets, noncurrent

43,737

48,673

Other assets, noncurrent

5,160

536

Total assets

$

449,917

$

358,407


Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

45,231

$

36,759

Accrued liabilities

57,650

42,271

Deferred revenue

33

73

Other liabilities

12,697

6,734

Total current liabilities

115,611

85,837

Operating lease liabilities, noncurrent

8,545

8,692

Other liabilities, noncurrent

30,211

7,934

Total liabilities

154,367

102,463

Stockholders’ equity:

Common stock

54

52

Additional paid-in capital

320,315

304,650

Accumulated other comprehensive loss

(255)

(237)

Accumulated deficit

(24,564)

(48,521)

Total stockholders’ equity

295,550

255,944

Total liabilities and stockholders’ equity

$

449,917

$

358,407

 


QUINSTREET, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)


(Unaudited)


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020

Net revenue

$

151,198

$

116,961

$

578,487

$

490,339

Cost of revenue (1)

132,622

105,147

507,956

437,864

Gross profit

18,576

11,814

70,531

52,475

Operating expenses: (1)

Product development

4,568

4,001

19,344

14,206

Sales and marketing

2,688

1,805

10,991

8,876

General and administrative

6,239

6,789

26,170

23,188

Operating income (loss)

5,081

(781)

14,026

6,205

Interest income

—

61

39

230

Interest expense

(349)

(130)

(1,296)

(696)

Other (expense) income , net

(37)

2,722

16,659

12,947

Income before income taxes

4,695

1,872

29,428

18,686

Provision for income taxes

(922)

(370)

(5,471)

(584)

Net income

$

3,773

$

1,502

$

23,957

$

18,102

Net income per share:

Basic

$

0.07

$

0.03

$

0.45

$

0.35

Diluted

$

0.07

$

0.03

$

0.43

$

0.34

Weighted average shares used in computing net income per share:

Basic

53,702

52,059

53,166

51,529

Diluted

55,473

53,301

55,129

53,387


(1) Cost of revenue and operating expenses include stock-based compensation expense as follows:

Cost of revenue

$

1,991

$

2,754

$

8,997

$

8,569

Product development

571

632

2,339

1,819

Sales and marketing

563

570

2,459

1,701

General and administrative

1,317

1,544

5,838

4,628

 


QUINSTREET, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


(Unaudited)


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020


Cash Flows from Operating Activities

Net income

$

3,773

$

1,502

$

23,957

$

18,102

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

4,191

2,959

16,201

11,476

Provision for (benefit from) sales returns and doubtful
accounts receivable

12

446

(341)

625

Stock-based compensation

4,442

5,500

19,633

16,717

Non-cash lease expense

(238)

(204)

(816)

259

Deferred income taxes

744

288

5,007

3,546

Gain on divestitures of businesses, net

—

(2,759)

(16,615)

(13,578)

Other adjustments, net

61

(130)

742

315

Changes in assets and liabilities:

Accounts receivable

(5,608)

7,720

(20,063)

11,354

Prepaid expenses and other current assets

607

(4,425)

5,954

(8,136)

Other assets, noncurrent

91

4,547

(173)

5,508

Accounts payable

5,544

(3,189)

6,558

103

Accrued liabilities

847

743

10,611

1,173

Deferred revenue

(54)

(27)

(40)

178

Other liabilities, noncurrent

—

1

—

(34)

Net cash provided by operating activities

14,412

12,972

50,615

47,608


Cash Flows from Investing Activities

Capital expenditures

(602)

(641)

(1,969)

(1,962)

Business acquisitions, net of cash acquired

—

—

(49,304)

(2,000)

Internal software development costs

(793)

(616)

(3,131)

(2,291)

Proceeds from divestitures of businesses, net of cash

divested

—

3,991

21,947

15,096

Purchases of equity investment

—

—

(4,000)

—

Other investing activities

—

—

—

25

Net cash (used in) provided by investing activities

(1,395)

2,734

(36,457)

8,868


Cash Flows from Financing Activities

Proceeds from exercise of common stock options

204

262

4,357

4,092

Payment of withholding taxes related to release of restricted
stock, net of share settlement

(1,462)

(963)

(7,980)

(6,376)

Post-closing payments and contingent consideration related

to acquisitions

(4,669)

(4,644)

(7,689)

(9,348)

Net cash used in financing activities

(5,927)

(5,345)

(11,312)

(11,632)

Effect of exchange rate changes on cash, cash equivalents
and restricted cash

26

9

(36)

143

Net increase  in cash, cash equivalents and restricted cash

7,116

10,370

2,810

44,987

Cash, cash equivalents and restricted cash at beginning of
period

103,217

97,153

107,523

62,536

Cash, cash equivalents and restricted cash at end of period

$

110,333

$

107,523

$

110,333

$

107,523


Reconciliation of cash, cash equivalents, and restricted
cash to the condensed consolidated balance sheets

Cash and cash equivalents

$

110,318

$

107,509

$

110,318

$

107,509

Restricted cash included in other assets, noncurrent

15

14

15

14


Total cash, cash equivalents and restricted cash

$

110,333

$

107,523

$

110,333

$

107,523

 


QUINSTREET, INC.


RECONCILIATION OF NET INCOME TO


ADJUSTED NET INCOME


(In thousands, except per share data)


(Unaudited)


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020

Net income

$

3,773

$

1,502

$

23,957

$

18,102

Amortization of intangible assets

3,024

2,011

11,870

7,810

Stock-based compensation

4,442

5,500

19,633

16,717

Acquisition and divestiture costs

45

634

811

985

Gain on divestitures of businesses, net

—

(2,759)

(16,615)

(13,578)

Strategic review costs

—

68

—

330

Litigation settlement expense

231

15

231

95

Tax settlement expense

310

—

310

—

Restructuring costs

43

3

1,076

421

Tax impact after non-GAAP items

(2,251)

387

(4,828)

(3,985)

Adjusted net income

$

9,617

$

7,361

$

36,445

$

26,897

Adjusted diluted net income per share

$

0.17

$

0.14

$

0.66

$

0.50

Weighted average shares used in computing

     adjusted diluted net income per share

55,473

53,301

55,129

53,387

 


QUINSTREET, INC.


RECONCILIATION OF NET INCOME TO


ADJUSTED EBITDA


(In thousands)


(Unaudited)


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020

Net income

$

3,773

$

1,502

$

23,957

$

18,102

Interest and other expense, net

386

106

1,213

1,097

Provision for income taxes

922

370

5,471

584

Depreciation and amortization

4,191

2,959

16,201

11,476

Stock-based compensation

4,442

5,500

19,633

16,717

Acquisition and divestiture costs

45

634

811

985

Gain on divestitures of businesses, net

—

(2,759)

(16,615)

(13,578)

Strategic review costs

—

68

—

330

Litigation settlement expense

231

15

231

95

Tax settlement expense

310

—

310

—

Restructuring costs

43

3

1,076

421

Adjusted EBITDA

$

14,343

$

8,398

$

52,288

$

36,229

 


QUINSTREET, INC.


RECONCILIATION OF CASH PROVIDED BY


OPERATING ACTIVITIES TO FREE CASH FLOW


AND NORMALIZED FREE CASH FLOW


(In thousands)


(Unaudited)


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020

Net cash provided by operating activities

$

14,412

$

12,972

$

50,615

$

47,608

Capital expenditures

(602)

(641)

(1,969)

(1,962)

Internal software development costs

(793)

(616)

(3,131)

(2,291)

Free cash flow

$

13,017

$

11,715

$

45,515

$

43,355

Changes in operating assets and liabilities

(1,427)

(5,370)

(2,847)

(10,146)

Normalized free cash flow

$

11,590

$

6,345

$

42,668

$

33,209

 

QUINSTREET, INC.

DISAGGREGATION OF REVENUE

(In thousands)

(Unaudited)

In the first quarter of fiscal year 2021, the Company completed the acquisition of Modernize, Inc. to increase the scale and capabilities in the home services client vertical. In addition, in fiscal year 2020 and in the first quarter of fiscal year 2021, the Company completed the divestitures of its education client vertical, business-to-business technology client vertical, its mortgage business, as well as its wholly owned subsidiaries, QuinStreet Brasil Online Marketing e Midia Ltda, and VEMM, LLC along with its interests in Euro-Demand Do Brasil Serviços de Geração de Leads Ltda to narrow its focus to the best performing businesses and market opportunities.

As a result of these activities, in the second quarter of fiscal year 2021, the Company updated its reporting structure which resulted in two client verticals: financial services and home services, which was applied on a retrospective basis. All remaining businesses that are not significant enough for separate reporting are included in other revenue. The following table presents the Company’s net revenue disaggregated by vertical:


Three Months Ended


Fiscal Year Ended


June 30,


June 30,


2021


2020


2021


2020

Net revenue:

Financial Services

$

112,168

$

88,486

$

426,819

$

366,289

Home Services

36,937

14,361

134,538

49,931

Other Revenue

2,093

—

5,543

—

Divested Businesses:

Education

—

13,887

11,587

61,214

Business-to-Business Technology

—

64

—

9,060

Mortgage Business

—

163

—

3,234

Brazil Businesses

—

—

—

611

Total net revenue

$

151,198

$

116,961

$

578,487

$

490,339

 

Cision View original content:https://www.prnewswire.com/news-releases/quinstreet-reports-fiscal-fourth-quarter-and-2021-results-301348629.html

SOURCE QuinStreet, Inc.

Posted on

Marathon Oil Reports Second Quarter 2021 Results

Accelerating Gross Debt Reduction and Increasing Base Dividend

PR Newswire

HOUSTON, Aug. 4, 2021 /PRNewswire/ — Marathon Oil Corporation (NYSE: MRO) reported second quarter 2021 net income of $16 million, or $0.02 per diluted share, which includes the impact of certain items not typically represented in analysts’ earnings estimates and that would otherwise affect comparability of results. The adjusted net income was $173 million, or $0.22 per diluted share. Net operating cash flow was $655 million, or $701 million before changes in working capital.

Highlights

  • Strong financial performance highlighted by $420 million of second quarter free cash flow generation; $863 million of free cash flow generation through first half of 2021
  • Committed to capital discipline with no change to $1 billion 2021 capital expenditure budget; second quarter capital expenditures of $289 million and first half 2021 capital expenditures of $473 million
  • Second quarter oil-equivalent production of 348,000 net boed; raising 2021 full year oil-equivalent production guidance by 5,000 net boed
  • Second quarter oil production of 170,000 net bopd; no change to full year 2021 oil production guidance
  • Raised quarterly base dividend by 25% to 5 cents per share
  • Full redemption of $900 million 2025 maturity in September accelerates $4.0 billion gross debt objective and increases total 2021 gross debt reduction to $1.4 billion; shifting return of capital focus to equity holders and retiring future debt at maturity
  • Raising return of capital target to at least 40% of cash flow from operations to equity holders in a $60/bbl WTI or higher price environment

“I am once again proud of the commitment and dedication of our employees and contractors to deliver outstanding operational results while also achieving top quartile safety performance,” said Chairman, President, and CEO Lee Tillman. “The combination of our high-quality multi-basin portfolio, our consistent operational execution, and our commitment to capital discipline has resulted in exceptional financial results, highlighted by over $850 million of free cash flow generation through just the first half of this year. Supported by such strong outcomes, we are raising our quarterly base dividend for the second time this year, accelerating our balance sheet improvement initiatives, and enhancing our return of capital framework. We are increasing our return of capital target to at least 40% of our cash flow from operations, assuming an oil price of $60/bbl WTI or higher, and expect to shift that return to equity holders given the strength of our balance sheet. We continue to believe that our commitment to a transparent and disciplined capital allocation model, ESG excellence, sustainable free cash flow generation, and meaningful return of capital is the best approach to maximizing shareholder value in our industry.”


United States (U.S.)

U.S. production averaged 283,000 net barrels of oil equivalent per day (boed) for second quarter 2021. Oil production averaged 159,000 net barrels of oil per day (bopd). U.S. unit production costs were $4.41 per boe for second quarter.

During second quarter, the Company brought a total of 61 gross Company-operated wells to sales in comparison to guidance of approximately 70 wells to sales. In the Eagle Ford, Marathon Oil’s second quarter production averaged 91,000 net boed. Oil production averaged 59,000 net bopd on 45 gross Company-operated wells to sales. In the Bakken, production averaged 107,000 net boed, including oil production of 70,000 net bopd. The Company brought 16 gross Company-operated wells to sales in the Bakken. Oklahoma production averaged 54,000 net boed, including oil production of 12,000 net bopd. Northern Delaware production averaged 24,000 net boed, including oil production of 13,000 net bopd.

International

Equatorial Guinea production averaged 65,000 net boed for second quarter 2021, including 11,000 net bopd of oil. Second quarter sales totaled 65,000 net boed, including 12,000 net bopd of oil. Unit production costs averaged $2.17 per boe. Net income from equity method investees totaled $49 million during second quarter.

Guidance

Marathon Oil’s 2021 capital expenditure guidance of $1 billion remains unchanged.

The Company is raising the midpoint of its 2021 full year U.S. oil-equivalent production guidance by 5,000 net boed. All other full year 2021 production guidance remains unchanged.

Due primarily to continued commodity price strength, the Company is raising its 2021 E.G. equity method income guidance to $180 million to $200 million, an increase of over 70% at the midpoint.

Corporate

CASH FLOW AND CAPEX: Net cash provided by operations was $655 million during second quarter 2021, or $701 million before changes in working capital. Second quarter capital expenditures totaled $289 million.

FREE CASH FLOW: Marathon Oil generated $420 million of free cash flow during second quarter and $863 million of free cash flow through the first half of 2021.

ADJUSTMENTS TO NET INCOME: The adjustments to net income for second quarter 2021 totaled $157 million, primarily due to the income impact associated with unrealized losses on derivative instruments, miscellaneous asset impairments, and make-whole premium associated with early debt retirement.

Accelerating Balance Sheet Improvement

Marathon Oil ended second quarter with total liquidity of $4.1 billion, which consisted of an undrawn revolving credit facility of $3.1 billion and $1.0 billion in cash and cash equivalents. The revolving credit facility was recently extended from May 2023 to June 2024. The Company continues to maintain an investment grade credit rating at all three primary rating agencies and recently received an outlook upgrade from stable to positive from Fitch.

In light of continued strong financial performance and significant free cash flow generation, the Company has given irrevocable notice of its intention to fully redeem its $900 million 3.85% Senior Notes Due 2025 with final settlement expected in September of 2021. This transaction will reduce gross debt by $900 million and accelerates the realization of Marathon Oil’s previously disclosed absolute gross debt objective of approximately $4.0 billion. The transaction will bring total 2021 gross debt reduction to $1.4 billion and contributes to approximately $50 million of annualized cash interest expense savings. Going forward, the company expects to retire future debt at maturity.

Base Dividend Increase and Enhanced Return of Capital Framework

Subsequent to the end of second quarter, the Company raised its quarterly base dividend, from 4 cents per share to 5 cents per share, the second consecutive quarterly increase to the base dividend.

The Company also updated and enhanced its return of capital framework. Marathon Oil now expects to return at least 40% of its cash flow from operations, assuming a WTI oil price of $60/bbl or higher, and is shifting its return of capital focus to equity holders given the strength of its balance sheet. The company has $1.3 billion of share repurchase authorization outstanding.

A slide deck and Quarterly Investor Packet will be posted to the Company’s website following this release today, August 4. On Thursday, August 5, at 9:00 a.m. ET, the Company will conduct a question and answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://ir.marathonoil.com/.


Non-GAAP Measures

 

In analyzing and planning for its business, Marathon Oil supplements its use of GAAP financial measures with non-GAAP financial measures, including adjusted net income (loss), adjusted net income (loss) per share, free cash flow, net cash provided by operations before changes in working capital and total capital expenditures.

Our presentation of adjusted net income (loss) and adjusted net income (loss) per share is a non-GAAP measure. Adjusted net income (loss) is defined as net income (loss) adjusted for gains/losses on dispositions, impairments of proved and certain unproved properties, goodwill and equity method investments, certain exploration expenses relating to a strategic decision to exit conventional exploration, unrealized derivative gain/loss on commodity and interest rate derivative instruments, effects of pension settlements and curtailments and other items that could be considered “non-operating” or “non-core” in nature. Management believes this is useful to investors as another tool to meaningfully represent our operating performance and to compare Marathon to certain competitors. Adjusted net income (loss) and adjusted net income (loss) per share should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) or net income (loss) per share as determined in accordance with U.S. GAAP.

Our presentation of free cash flow is a non-GAAP measure. Free cash flow before dividend (“free cash flow”) is defined as net cash provided by operating activities adjusted for working capital, capital expenditures, and EG return of capital and other. Management believes this is useful to investors as a measure of Marathon’s ability to fund its capital expenditure programs, service debt, and fund other distributions to stockholders. Free cash flow should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with U.S. GAAP.

Our presentation of net cash provided by operations before changes in operating working capital is defined as net cash provided by operating activities adjusted for operating working capital and is a non-GAAP measure. Management believes this is useful to investors as an indicator of Marathon’s ability to generate cash quarterly or year-to-date by eliminating differences caused by the timing of certain working capital items. Net cash provided by operations before changes in working capital should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with U.S. GAAP.

Our presentation of total capital expenditures is a non-GAAP measure. Total capital expenditures is defined as cash additions to property, plant and equipment adjusted for the change in working capital associated with property, plant and equipment and additions to other assets. Management believes this is useful to investors as an indicator of Marathon’s commitment to capital expenditure discipline by eliminating differences caused by the timing of certain working capital and other items. Total capital expenditures should not be considered in isolation or as an alternative to, or more meaningful than, cash additions to property, plant and equipment as determined in accordance with U.S. GAAP.

These non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with GAAP results may provide a more complete understanding of factors and trends affecting the business and are a useful tool to help management and investors make informed decisions about Marathon Oil’s financial and operating performance. These measures should not be considered in isolation or as an alternative to their most directly comparable GAAP financial measures. A reconciliation to their most directly comparable GAAP financial measures can be found in our investor package on our website at https://ir.marathonoil.com/ and in the tables below
.
Marathon Oil strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.


Forward-looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including without limitation statements regarding the Company’s future capital budgets and allocations, future performance, expected free cash flow, future debt reduction and the timing thereof, balance sheet enhancement, returns of capital to investors (and the focus of such returns), business strategy, asset quality, drilling plans, production guidance, E.G. equity method income guidance and other plans and objectives for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “outlook,” “plan,” “positioned,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While the Company believes its assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: conditions in the oil and gas industry, including supply/demand levels for crude oil and condensate, NGLs and natural gas and the resulting impact on price; changes in expected reserve or production levels; changes in political or economic conditions in the U.S. and Equatorial Guinea, including changes in foreign currency exchange rates, interest rates, inflation rates; actions taken by the members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia affecting the production and pricing of crude oil; and other global and domestic political, economic or diplomatic developments; capital available for exploration and development; risks related to the Company’s hedging activities; voluntary or involuntary curtailments, delays or cancellations of certain drilling activities; well production timing; liability resulting from litigation; drilling and operating risks; lack of, or disruption in, access to storage capacity, pipelines or other transportation methods; availability of drilling rigs, materials and labor, including the costs associated therewith; difficulty in obtaining necessary approvals and permits; non-performance by third parties of contractual or legal obligations, including due to bankruptcy; changes in our credit ratings; hazards such as weather conditions, a health pandemic (including COVID-19), acts of war or terrorist acts and the government or military response thereto; security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business; changes in safety, health, environmental, tax and other regulations, requirements or initiatives, including initiatives addressing the impact of global climate change, air emissions, or water management; other geological, operating and economic considerations; and the risk factors, forward-looking statements and challenges and uncertainties described in the Company’s 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases, available at https://ir.marathonoil.com/. Except as required by law, the Company undertakes no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Media Relations Contact:

Rebecca Skiba: 713-296-2584

Investor Relations Contacts:

Guy Baber: 713-296-1892
John Reid: 713-296-4380

 


Consolidated Statements of Income (Unaudited)


Three Months Ended


June 30


Mar. 31


June 30


(In millions, except per share data)


2021


2021


2020


Revenues and other income:

Revenues from contracts with customers

$

1,254

$

1,177

$

490

Net gain (loss) on commodity derivatives

(166)

(153)

(70)

Income (loss) from equity method investments

49

44

(152)

Net gain (loss) on disposal of assets

1

—

(2)

Other income

5

3

6

Total revenues and other income

1,143

1,071

272


Costs and expenses:

Production

126

121

129

Shipping, handling and other operating

167

152

105

Exploration

25

21

26

Depreciation, depletion and amortization

532

496

597

Impairments

46

1

—

Taxes other than income

74

74

30

General and administrative

68

89

88

Total costs and expenses

1,038

954

975


Income (loss) from operations

105

117

(703)

Net interest and other

(59)

(13)

(69)

Other net periodic benefit (costs) credits

(1)

3

7

Loss on early extinguishment of debt

(19)

—

—


Income (loss) before income taxes

26

107

(765)

Provision (benefit) for income taxes

10

10

(15)


Net income (loss)

$

16

$

97

$

(750)


Adjusted Net Income (Loss)


Net income (loss)

$

16

$

97

$

(750)

Adjustments for special items (pre-tax):

Net (gain) loss on disposal of assets

(1)

—

2

Proved property impairments

46

1

—

Exploratory dry well costs, unproved property impairments and other

7

—

—

Pension settlement

5

—

14

Pension curtailment

—

—

(17)

Unrealized (gain) loss on derivative instruments

75

82

96

Unrealized (gain) on interest rate swaps

(8)

(41)

—

Reduction in workforce

1

11

13

Impairment of equity method investment

—

—

152

Loss on early extinguishment of debt

19

—

—

Other

13

16

13


Adjustments for special items

157

69

273


Adjusted net income (loss) (a)

$

173

$

166

$

(477)


Per diluted share:

Net income (loss)

$

0.02

$

0.12

$

(0.95)

Adjusted net income (loss) (a)

$

0.22

$

0.21

$

(0.60)

Weighted average diluted shares

789

789

790

(a)

Non-GAAP financial measure. See “Non-GAAP Measures” above for further discussion.

 


Supplemental Statistics (Unaudited)


Three Months Ended


June 30


Mar. 31


June 30


(In millions)


2021


2021


2020


Segment income (loss)

United States

$

207

$

212

$

(365)

International

68

50

(6)

Not allocated to segments

(259)

(165)

(379)


Net income (loss)

$

16

$

97

$

(750)


Cash flows

Net cash provided by operating activities

$

655

$

622

$

9

Changes in working capital

46

15

77


Net cash provided by operating activities before changes in working capital (a)

$

701

$

637

$

86


Free Cash Flow

Net cash provided by operating activities before changes in working capital (a)

$

701

$

637

$

86

Adjustments for free cash flow:

Capital expenditures

(289)

(184)

(126)

EG return of capital and other

8

(10)

—


Free cash flow (a)

$

420

$

443

$

(40)


Capital Expenditures

Cash additions to property, plant and equipment

$

(274)

$

(209)

$

(326)

Change in working capital associated with PP&E

(15)

25

187

Additions to other assets

—

—

13


Total capital expenditures (a)

$

(289)

$

(184)

$

(126)

(a)

Non-GAAP financial measure. See “Non-GAAP Measures” above for further discussion.

 


Supplemental Statistics (Unaudited)


Three Months Ended


Year Ended


June 30


Mar. 31


June 30


Dec. 31


Net Production


2021


2021


2020


2020


Equivalent Production (mboed)

United States

283

276

307

306

International

65

69

83

77

Total net production

348

345

390

383


Oil Production (mbbld)

United States

159

160

182

177

International

11

12

15

13

Total net production

170

172

197

190

 


Supplemental Statistics (Unaudited)


Three Months Ended


June 30


Mar. 31


June 30


2021


2021


2020


United States – net sales volumes


Crude oil and condensate (mbbld)


159


159


183

Eagle Ford

60

50

66

Bakken

70

77

81

Oklahoma

12

12

16

Northern Delaware

13

15

16

Other United States (a)

4

5

4


Natural gas liquids (mbbld)


60


53


56

Eagle Ford

14

12

20

Bakken

22

19

12

Oklahoma

17

17

16

Northern Delaware

6

4

7

Other United States (a)

1

1

1


Natural gas (mmcfd)


386


378


413

Eagle Ford

103

91

133

Bakken

90

93

60

Oklahoma

150

145

167

Northern Delaware

32

35

44

Other United States (a)

11

14

9


Total United States (mboed)


283


275


308


International – net sales volumes


Crude oil and condensate (mbbld)


12


9


16

Equatorial Guinea

12

9

16


Natural gas liquids (mbbld)


7


8


9

Equatorial Guinea

7

8

9


Natural gas (mmcfd)


276


295


354

Equatorial Guinea

276

295

354


Total International (mboed)


65


66


84


Total Company – net sales volumes (mboed)


348


341


392


Net sales volumes of equity method investees

LNG (mtd)

3,094

3,766

4,635

Methanol (mtd)

744

1,092

738

Condensate and LPG (boed)

7,892

10,730

10,896

(a)

Includes sales volumes from the sale of certain non-core proved properties in our United States segment.

 


Supplemental Statistics (Unaudited)


Three Months Ended


June 30


Mar. 31


June 30


2021


2021


2020


United States – average price realizations (a)


Crude oil and condensate ($ per bbl) (b)


$


64.73


$


55.38


$


21.65

Eagle Ford

65.51

57.52

23.53

Bakken

64.15

53.65

20.03

Oklahoma

63.77

55.63

22.09

Northern Delaware

65.53

57.06

22.36

Other United States (c)

63.80

54.83

18.31


Natural gas liquids ($ per bbl)


$


24.17


$


23.94


$


7.09

Eagle Ford

25.80

24.43

8.70

Bakken

24.37

23.22

2.56

Oklahoma

23.28

25.08

8.67

Northern Delaware

22.63

22.60

6.24

Other United States (c)

21.19

20.89

9.68


Natural gas ($ per mcf)


$


2.61


$


6.31


$


1.44

Eagle Ford

3.09

5.78

1.69

Bakken

2.13

2.96

0.93

Oklahoma

3.01

8.36

1.59

Northern Delaware

1.86

7.85

0.88

Other United States (c)

(1.19)

6.81

1.25


International – average price realizations


Crude oil and condensate ($ per bbl)


$


52.78


$


44.13


$


13.79

Equatorial Guinea

52.78

44.13

13.79


Natural gas liquids ($ per bbl)


$


1.00


$


1.00


$


1.00

Equatorial Guinea (d)

1.00

1.00

1.00


Natural gas ($ per mcf)


$


0.24


$


0.24


$


0.24

Equatorial Guinea (d)

0.24

0.24

0.24


Benchmark

WTI crude oil (per bbl)

$

66.17

$

58.14

$

28.00

Brent (Europe) crude oil (per bbl) (e)

$

68.83

$

60.82

$

29.34

Mont Belvieu NGLs (per bbl) (f)

$

24.81

$

23.98

$

12.25

Henry Hub natural gas (per mmbtu) (g)

$

2.83

$

2.69

$

1.72

(a)

Excludes gains or losses on commodity derivative instruments.

(b)

Inclusion of realized gains (losses) on crude oil derivative instruments would have decreased average price realizations by $5.54 for the  second quarter 2021 and by $4.61 for the first quarter 2021 and increased average price realizations by $1.59 for the second quarter 2020.

(c)

Includes sales volumes from the sale of certain non-core proved properties in our United States segment.

(d)

Represents fixed prices under long-term contracts with Alba Plant LLC, Atlantic Methanol Production Company LLC and/or Equatorial Guinea LNG Holdings Limited, which are equity method investees. The Alba Plant LLC processes the NGLs and then sells secondary condensate, propane, and butane at market prices. Marathon Oil includes its share of income from each of these equity method investees in the International segment.

(e)

Average of monthly prices obtained from Energy Information Administration website.

(f)

Bloomberg Finance LLP: Y-grade Mix NGL of 55% ethane, 25% propane, 5% butane, 8% isobutane and 7% natural gasoline.

(g)

Settlement date average per mmbtu.

 


Full Year 2021


Production Guidance


Oil Production (mbpod)


Equivalent Production (mboed)


2Q21


2021 Guidance


2Q21


2021 Guidance


Net production

United States

159

158 – 162

283

275 – 285

International

11

11 – 13

65

60 – 70

Total net production

170

169 – 175

348

335 – 355

The following table sets forth outstanding derivative contracts as of August 2, 2021, and the weighted average prices for those contracts:


2021


2022


Third
Quarter


Fourth
Quarter


First
Quarter


Second
Quarter


Third
Quarter


Fourth
Quarter



Crude Oil



NYMEX WTI Three-Way Collars

Volume (Bbls/day)

40,000

40,000

20,000

20,000

—

—

Weighted average price per Bbl:

Ceiling

$

74.07

$

78.05

$

89.46

$

89.46

$

—

$

—

Floor

$

48.75

$

50.00

$

50.00

$

50.00

$

—

$

—

Sold put

$

38.75

$

40.00

$

40.00

$

40.00

$

—

$

—



NYMEX WTI Two-Way Collars

Volume (Bbls/day)

40,000

40,000

—

—

—

—

Weighted average price per Bbl:

Ceiling

$

59.41

$

58.92

$

—

$

—

$

—

$

—

Floor

$

39.25

$

39.25

$

—

$

—

$

—

$

—



NYMEX Roll Basis Swaps

Volume (Bbls/day)

—

40,000

45,000

45,000

45,000

45,000

Weighted average price per Bbl

$

—

$

1.15

$

0.56

$

0.56

$

0.56

$

0.56



Natural Gas



Henry Hub (“HH”) Two-Way Collars

Volume (MMBtu/day)

200,000

200,000

—

—

—

—

Weighted average price per MMBtu:

Ceiling

$

3.05

$

3.05

$

—

$

—

$

—

$

—

Floor

$

2.50

$

2.50

$

—

$

—

$

—

$

—



HH Fixed Price Swaps

Volume (MMBtu/day)

50,000

50,000

—

—

—

—

Weighted average price per MMBtu

$

2.88

$

2.88

$

—

$

—

$

—

$

—



Three-Way Collars

Volume (MMBtu/day)

—

—

30,000

—

—

—

Weighted average price per MMBtu:

Ceiling

$

—

$

—

$

4.50

$

—

$

—

$

—

Floor

$

—

$

—

$

3.50

$

—

$

—

$

—

Sold put

$

—

$

—

$

2.50

$

—

$

—

$

—



NGL



Fixed Price Ethane Swaps (a)

Volume (Bbls/day)

5,000

5,000

—

—

—

—

Weighted average price per Bbl

$

10.92

$

10.92

$

—

$

—

$

—

$

—



Fixed Price Propane Swaps (b)

Volume (Bbls/day)

5,000

5,000

—

—

—

—

Weighted average price per Bbl

$

23.19

$

23.19

$

—

$

—

$

—

$

—

(a)

The fixed price ethane swap is priced at OPIS Mont Belvieu Purity Ethane.

(b)

The fixed price propane swap is priced at OPIS Mont Belvieu Non-TET Propane.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/marathon-oil-reports-second-quarter-2021-results-301348658.html

SOURCE Marathon Oil Corporation

Posted on

Shore Bancshares, Inc. Reports Quarterly Dividend of $0.12 Per Share

PR Newswire

EASTON, Md., Aug. 4, 2021 /PRNewswire/ — Shore Bancshares, Inc. (NASDAQ – SHBI) announced that the Board of Directors has declared a quarterly common stock dividend in the amount of $0.12 per share, payable August 31, 2021 to stockholders of record on August 14, 2021.      

“We are pleased to announce the continuation of our quarterly cash dividend of $0.12 per share.” said Lloyd L. “Scott” Beatty, Jr., President and Chief Executive Officer.  “The second quarter and first-half results for 2021 have resulted in solid earnings and healthy loan and deposit growth. In addition, we remain in a strong capital position. As always, we are committed to growth and enhancing shareholder value.” 

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

Additional information is available at www.shorebancshares.com.

Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/shore-bancshares-inc-reports-quarterly-dividend-of-0-12-per-share-301348631.html

SOURCE Shore Bancshares, Inc.

Posted on

Invesco Mortgage Capital Inc. Reports Second Quarter 2021 Financial Results

PR Newswire

ATLANTA, Aug. 4, 2021 /PRNewswire/ — Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced financial results for the quarter ended June 30, 2021.

  • Net loss per common share of $0.34 compared to $0.09 in Q1 2021
  • Earnings available for distribution per common share* (formerly core earnings per common share) of $0.10 compared to $0.11 in Q1 2021
  • Common stock dividend of $0.09 per common share compared to $0.09 per common share in Q1 2021
  • Book value per common share** of $3.21 compared to $3.65 at Q1 2021
  • Economic return*** of (9.6%) compared to (3.1%) in Q1 2021


Update from John Anzalone, Chief Executive Officer

“We are pleased to announce earnings available for distribution of $0.10 per common share for the second quarter of 2021. Earnings available for distribution continues to be supported by strong dollar rolls, relatively slow prepayment speeds on our specified pool collateral and increased returns on equity on new investments. During the quarter, we made progress in re-balancing our capital structure by redeeming $140.0 million of our Series A Preferred Stock and raising $145.9 million of common equity. At quarter-end, almost all of our $8.7 billion investment portfolio was invested in Agency residential mortgage-backed securities (“Agency RMBS”), and we maintained a sizeable balance of unrestricted cash and unencumbered investments totaling $651.1 million.

“Agency RMBS sharply underperformed during the second quarter, as continued strong demand from the Federal Reserve was more than offset by elevated net supply, reduced demand from commercial banks, increased prepayment concerns and an anticipation that the Federal Reserve’s timeline for reducing purchases could be accelerated. This underperformance resulted in a 12.1% decrease in book value per common share and a (9.6%) economic return for the quarter. While wider spreads on our target assets continue to support the earnings power of the portfolio, the headwinds that mortgages faced during the second quarter largely remain intact.”

* Earnings available for distribution (and by calculation, earnings available for distribution per common share) is a non-Generally Accepted Accounting Principles (“GAAP”) financial measure. Refer to the section entitled “Non-GAAP Financial Measures” for important disclosures and a reconciliation to the most comparable U.S. GAAP measure.

** Book value per common share is calculated as total stockholders’ equity less the liquidation preference of the Company’s preferred stock ($155.0 million and $287.5 million for Series B and Series C Preferred Stock as of June 30, 2021, respectively, and $140.0 million, $155.0 million and $287.5 million for Series A, Series B and Series C Preferred Stock as of March 31, 2021, respectively); divided by total common shares outstanding.

*** Economic return for the quarter ended June 30, 2021 is defined as the change in book value per common share from March 31, 2021 to June 30, 2021 of ($0.44); plus dividends declared of $0.09 per common share; divided by the March 31, 2021 book value per common share of $3.65. Economic return for quarter ended March 31, 2021 is defined as the change in book value per common share from December 31, 2020 to March 31, 2021 of ($0.21); plus dividends declared of $0.09 per common share; divided by the December 31, 2020 book value per common share of $3.86.

Key performance indicators for the quarters ended June 30, 2021 and March 31, 2021 are summarized in the table below.

($ in millions, except share amounts)

Q2 ’21

Q1 ’21

Variance



Average Balances

(unaudited)

(unaudited)

Average earning assets (at amortized cost)

$8,829.1

$9,330.1

($501.0)

Average borrowings

$7,945.9

$8,347.4

($401.5)

Average stockholders’ equity*

$1,235.3

$1,184.8

$50.5



U.S. GAAP Financial Measures

Total interest income

$43.2

$40.0

$3.2

Total interest expense

($3.2)

($1.7)

($1.5)

Net interest income

$46.3

$41.7

$4.6

Total expenses

$7.6

$6.9

$0.7

Net income (loss) attributable to common stockholders

($88.3)

($20.4)

($67.9)

Average earning asset yields

1.96

%

1.72

%

0.24

%

Average cost of funds

(0.16)

%

(0.08)

%

(0.08)

%

Average net interest rate margin

2.12

%

1.80

%

0.32

%

Period-end weighted average asset yields**

2.12

%

1.97

%

0.15

%

Period-end weighted average cost of funds

0.10

%

0.15

%

(0.05)

%

Period-end weighted average net interest rate margin

2.02

%

1.82

%

0.20

%

Book value per common share***

$3.21

$3.65

($0.44)

Earnings (loss) per common share (basic)

($0.34)

($0.09)

($0.25)

Earnings (loss) per common share (diluted)

($0.34)

($0.09)

($0.25)

Debt-to-equity ratio

5.7

x

5.6

x

0.1

x



Non-GAAP Financial Measures****

Earnings available for distribution

$25.0

$25.2

($0.2)

Effective interest income

$43.2

$40.0

$3.2

Effective interest expense

$6.8

$8.3

($1.5)

Effective net interest income

$36.3

$31.8

$4.5

Effective yield

1.96

%

1.72

%

0.24

%

Effective cost of funds

0.34

%

0.40

%

(0.06)

%

Effective interest rate margin

1.62

%

1.32

%

0.30

%

Earnings available for distribution per common share

$0.10

$0.11

($0.01)

Economic debt-to-equity ratio

6.8

x

6.6

x

0.2

x

* Average stockholders’ equity is calculated based on the weighted month-end balance of total stockholders’ equity excluding equity attributable to preferred stockholders.

** Period-end weighted average yields are based on amortized cost as of period end and incorporate future prepayment and loss assumptions.

*** Book value per common share is calculated as total stockholders’ equity less the liquidation preference of the Company’s preferred stock ($155.0 million and $287.5 million for Series B and Series C Preferred Stock as of June 30, 2021, respectively, and $140.0 million, $155.0 million and $287.5 million for Series A, Series B and Series C Preferred Stock as of March 31, 2021, respectively); divided by total common shares outstanding.

**** Earnings available for distribution (and by calculation, earnings available for distribution per common share), effective interest income (and by calculation, effective yield), effective interest expense (and by calculation, effective cost of funds), effective net interest income (and by calculation, effective interest rate margin), and economic debt-to-equity ratio are non-GAAP financial measures. Refer to the section entitled “Non-GAAP Financial Measures” for important disclosures and a reconciliation to the most comparable U.S. GAAP measures of net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share), total interest income (and by calculation, average earning asset yields), total interest expense (and by calculation, cost of funds), net interest income (and by calculation, net interest rate margin) and debt-to-equity ratio.

Financial Summary

Net loss attributable to common stockholders for the second quarter of 2021 was $88.3 million compared to net loss attributable to common stockholders of $20.4 million for the first quarter of 2021. Net loss attributable to common stockholders during the second quarter of 2021 was primarily driven by a $186.3 million net loss on derivatives and $14.6 million of preferred dividends, partially offset by a $72.6 million net gain on investments and $43.2 million of interest income.

Commencing with the second quarter of 2021, the Company changed the title of its non-GAAP measure of core earnings (and by calculation, core earnings per common share), to earnings available for distribution (and by calculation, earnings available for distribution per common share) to clarify what the measure presents. The adjustments made to reconcile net income (loss) attributable to common stockholders to earnings available for distribution are identical to those adjustments that the Company previously made to determine core earnings.

Earnings available for distribution was $25.0 million for the second quarter of 2021 compared to $25.2 million for the first quarter of 2021. Earnings available for distribution was negatively impacted during the second quarter of 2021 by a $4.7 million deemed dividend for issuance and redemption costs of the Company’s Series A Preferred Stock that was partially offset by a $4.5 million increase in effective net interest income. As previously announced, the Company redeemed its Series A Preferred Stock during the second quarter of 2021 at par. The Company used proceeds from the issuance of $145.9 million of common stock during the second quarter of 2021 to redeem its Series A Preferred Stock.

Book value per common share for the second quarter of 2021 decreased 12.1% to $3.21 compared to the first quarter of 2021 as a sharp decline in long term interest rates resulted in Agency RMBS underperforming interest rate swap hedges during the quarter. The Agency RMBS sector performed poorly during the second quarter, as net supply was elevated, commercial bank demand declined and the potential for an earlier than expected tapering of the Federal Reserve’s MBS purchase program increased. The benchmark 10 year U.S. Treasury rate declined 27 basis points to 1.47%.

Total average earning assets decreased to $8.8 billion in the second quarter of 2021 from $9.3 billion in the first quarter of 2021, and total average borrowings decreased to $7.9 billion in the second quarter of 2021 from $8.3 billion in the first quarter of 2021. Average earning assets and average borrowings decreased during the second quarter of 2021 as the Company actively managed leverage.

Average net interest rate margin increased 32 basis points to 2.12% in the second quarter of 2021 compared to the first quarter of 2021 primarily due to higher average earning asset yields. Average earning asset yields increased 24 basis points to 1.96% in the second quarter of 2021 compared to the first quarter of 2021 primarily due to the Company’s rotation into higher yielding Agency RMBS. The Company’s Agency RMBS portfolio consists of 2.0% to 3.0% coupon 30 year fixed-rate securities as of June 30, 2021. Average cost of funds was (0.16%) in the second quarter of 2021 compared to (0.08%) during the first quarter of 2021. The decrease in average cost of funds during the second quarter of 2021 was primarily due to lower repurchase agreement borrowings rates.

The Company’s debt-to-equity ratio was 5.7x as of June 30, 2021 compared to 5.6x as of March 31, 2021. The Company’s economic debt-to-equity ratio was 6.8x as of June 30, 2021 compared to 6.6x as of March 31, 2021.

Total expenses for the second quarter of 2021 increased to approximately $7.6 million compared to $6.9 million for the first quarter of 2021 primarily due to higher management and professional fees. The ratio of annualized total expenses to average stockholders’ equity* increased to 2.46% in the second quarter of 2021 from 2.32% in the first quarter of 2021.

As previously announced on June 23, 2021, the Company declared a common stock dividend of $0.09 per share paid on July 27, 2021 to its stockholders of record as of July 6, 2021. The Company declared the following dividends on August 3, 2021: a Series B Preferred Stock dividend of $0.4844 per share payable on September 27, 2021 to its stockholders of record as of September 5, 2021 and a Series C Preferred Stock dividend of $0.46875 per share payable on September 27, 2021 to its stockholders of record as of September 5, 2021.

* The ratio of annualized total expenses to average stockholders’ equity is calculated as the annualized sum of management fees plus general and administrative expenses divided by average stockholders’ equity.

About Invesco Mortgage Capital Inc.

Invesco Mortgage Capital Inc. is a real estate investment trust that primarily focuses on investing in, financing and managing mortgage-backed securities and other mortgage-related assets. Invesco Mortgage Capital Inc. is externally managed and advised by Invesco Advisers, Inc., a registered investment adviser and an indirect wholly-owned subsidiary of Invesco Ltd., a leading independent global investment management firm.

Earnings Call

Members of the investment community and the general public are invited to listen to the Company’s earnings conference call on Thursday, August 5, 2021, at 9:00 a.m. ET, by calling one of the following numbers:

North America Toll Free:

800-857-7465

International:

1-312-470-0052

Passcode:

Invesco

An audio replay will be available until 5:00 pm ET on August 19, 2021 by calling:

800-839-5154 (North America) or 1-203-369-3358 (International)

The presentation slides that will be reviewed during the call will be available on the Company’s website at www.invescomortgagecapital.com.

Cautionary Notice Regarding Forward-Looking Statements

This press release, the related presentation and comments made in the associated conference call, may include statements and information that constitute “forward-looking statements” within the meaning of the U.S. securities laws as defined in the Private Securities Litigation Reform Act of 1995, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements include our views on the risk positioning of our portfolio, domestic and global market conditions (including the residential and commercial real estate market), the ongoing spread and the economic and operational impact of the COVID-19 pandemic, the market for our target assets, our financial performance, including our earnings available for distribution, economic return, comprehensive income and changes in our book value, our intention and ability to pay dividends, our ability to continue performance trends, the stability of portfolio yields, interest rates, credit spreads, prepayment trends, financing sources, cost of funds, our leverage and equity allocation. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks identified under the captions “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the Securities and Exchange Commission’s website at www.sec.gov.

All written or oral forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Investor Relations Contact: Jack Bateman, 404-439-3323


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


Three Months Ended


Six Months Ended


$ in thousands, except share amounts



June 30,
2021



March 31,
2021



June 30,
2020



June 30,
2021



June 30,
2020


Interest income

Mortgage-backed and credit risk transfer securities

42,634

39,434

29,628

82,068

215,164

Commercial and other loans

520

576

545

1,096

1,708

Total interest income

43,154

40,010

30,173

83,164

216,872


Interest expense

Repurchase agreements (1)

(3,177)

(1,660)

(1,270)

(4,837)

77,772

Secured loans

—

—

1,712

—

8,358

Total interest expense

(3,177)

(1,660)

442

(4,837)

86,130


Net interest income

46,331

41,670

29,731

88,001

130,742


Other income (loss)

Gain (loss) on investments, net

72,620

(331,857)

(306,366)

(259,237)

(1,061,849)

(Increase) decrease in provision for credit losses

830

938

—

1,768

—

Equity in earnings (losses) of unconsolidated ventures

331

(94)

318

237

488

Gain (loss) on derivative instruments, net

(186,284)

286,961

(343)

100,677

(911,122)

Realized and unrealized credit derivative income (loss), net

—

—

(2,738)

—

(35,790)

Net gain (loss) on extinguishment of debt

—

—

3,701

—

(1,107)

Other investment income (loss), net

16

(16)

731

—

1,534


Total other income (loss)

(112,487)

(44,068)

(304,697)

(156,555)

(2,007,846)


Expenses

Management fee – related party

5,455

4,884

9,793

10,339

20,746

General and administrative

2,147

1,993

4,080

4,140

7,181


Total expenses

7,602

6,877

13,873

14,479

27,927

Net income (loss) attributable to Invesco Mortgage Capital Inc.

(73,758)

(9,275)

(288,839)

(83,033)

(1,905,031)

Dividends to preferred stockholders

9,900

11,107

11,106

21,007

22,213

Issuance and redemption costs of redeemed preferred stock

4,682

—

—

4,682

—

Net income (loss) attributable to common stockholders

(88,340)

(20,382)

(299,945)

(108,722)

(1,927,244)

Net income (loss) per share:

Net income (loss) attributable to common stockholders

Basic

(0.34)

(0.09)

(1.80)

(0.45)

(11.91)

Diluted

(0.34)

(0.09)

(1.80)

(0.45)

(11.91)

(1)

Periods with negative interest expense on repurchase agreements are due to amortization of net deferred gains on de-designated interest rate swaps that exceeds current period interest expense on repurchase agreements. For further information on amortization of amounts classified in accumulated other comprehensive income before the Company discontinued hedge accounting, see Note 8 and Note 12 of the Company’s condensed consolidated financial statements filed in Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

 


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


(Unaudited)


Three Months Ended


Six Months Ended


$ in thousands


June 30,

2021


March 31,

2021


June 30,

2020


June 30,

2021


June 30,

2020

Net income (loss)

(73,758)

(9,275)

(288,839)

(83,033)

(1,905,031)

Other comprehensive income (loss):

Unrealized gain (loss) on mortgage-backed and credit
risk transfer securities, net

1,155

981

(53,271)

2,136

(239,876)

Reclassification of unrealized (gain) loss on sale of
mortgage-backed and credit risk transfer securities to
gain (loss) on investments, net

—

—

34,782

—

71,739

Reclassification of amortization of net deferred (gain)
loss on de-designated interest rate swaps to repurchase
agreements interest expense

(5,429)

(5,368)

(4,503)

(10,797)

(14,570)

Currency translation adjustments on investment in
unconsolidated venture

(632)

609

(388)

(23)

92

Total other comprehensive income (loss)

(4,906)

(3,778)

(23,380)

(8,684)

(182,615)

Comprehensive income (loss)

(78,664)

(13,053)

(312,219)

(91,717)

(2,087,646)

Less: Dividends to preferred stockholders

(9,900)

(11,107)

(11,106)

(21,007)

(22,213)

Less: Issuance and redemption costs of redeemed
preferred stock

(4,682)

—

—

(4,682)

—

Comprehensive income (loss) attributable to common
stockholders

(93,246)

(24,160)

(323,325)

(117,406)

(2,109,859)

 


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)


As of


$ in thousands, except share amounts


June 30, 2021


December 31, 2020


ASSETS

Mortgage-backed securities, at fair value (including pledged securities of $8,248,952 and $7,614,935,
respectively; net of allowance for credit losses of $1,768 as of December 31, 2020)

8,730,663

8,172,182

Cash and cash equivalents

134,664

148,011

Restricted cash

353,386

244,573

Due from counterparties

300

1,078

Investment related receivable

17,809

15,840

Derivative assets, at fair value

4,417

10,004

Other assets

35,461

41,163

Total assets

9,276,700

8,632,851


LIABILITIES AND STOCKHOLDERS’ EQUITY


Liabilities:

Repurchase agreements

7,851,204

7,228,699

Derivative liabilities, at fair value

17,262

6,344

Dividends payable

26,071

18,970

Investment related payable

274

274

Accrued interest payable

377

823

Collateral held payable

310

3,546

Accounts payable and accrued expenses

1,759

1,448

Due to affiliate

6,064

5,589

Total liabilities

7,903,321

7,265,693


Commitments and contingencies (See Note 14) (1)


Stockholders’ equity:

Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:

7.75% Series A Cumulative Redeemable Preferred Stock: no shares and 5,600,000 shares issued and
outstanding, respectively ($140,000 aggregate liquidation preference as of December 31, 2020)

—

135,356

7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued
and outstanding ($155,000 aggregate liquidation preference)

149,860

149,860

7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 11,500,000 shares issued
and outstanding ($287,500 aggregate liquidation preference)

278,108

278,108

Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 289,680,760 and 203,222,108
shares issued and outstanding, respectively

2,897

2,032

Additional paid in capital

3,693,917

3,387,552

Accumulated other comprehensive income

49,921

58,605

Retained earnings (distributions in excess of earnings)

(2,801,324)

(2,644,355)

Total stockholders’ equity

1,373,379

1,367,158

Total liabilities and stockholders’ equity

9,276,700

8,632,851

(1)

See Note 14 of the Company’s condensed consolidated financial statements filed in Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

Non-GAAP Financial Measures

The Company uses the following non-GAAP financial measures to analyze its operating results and believes these financial measures are useful to investors in assessing the Company’s performance as further discussed below:

  • earnings available for distribution (and by calculation, earnings available for distribution per common share),
  • effective interest income (and by calculation, effective yield),
  • effective interest expense (and by calculation, effective cost of funds),
  • effective net interest income (and by calculation, effective interest rate margin), and
  • economic debt-to-equity ratio.

The most directly comparable U.S. GAAP measures are:

  • net income (loss) attributable to common stockholders (and by calculation, basic earnings (loss) per common share),
  • total interest income (and by calculation, earning asset yields),
  • total interest expense (and by calculation, cost of funds),
  • net interest income (and by calculation, net interest rate margin), and
  • debt-to-equity ratio.

Commencing with the quarter ended June 30, 2021, the Company changed the title of its non-GAAP measure of core earnings (and by calculation, core earnings per common share) to earnings available for distribution (and by calculation, earnings available for distribution per common share) to clarify what the measure presents. The adjustments made to reconcile net income (loss) attributable to common stockholders to earnings available for distribution are identical to those adjustments that the Company previously made to determine core earnings. 

The Company did not present earnings available for distribution for the first half of 2020 or for the year ended December 31, 2020 because earnings available for distribution excluded the material adverse impact of the market disruption caused by the COVID-19 pandemic on the Company’s financial condition. In addition, earnings available for distribution for the first half of 2020 and the year ended December 31, 2020 was not indicative of the reduced earnings potential of the Company’s current investment portfolio.

The non-GAAP financial measures used by the Company’s management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures. In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of its peer companies.

Earnings Available for Distribution (formerly Core Earnings)

The Company’s business objective is to provide attractive risk-adjusted returns to its stockholders, primarily through dividends and secondarily through capital appreciation. The Company uses earnings available for distribution as a measure of its investment portfolio’s ability to generate income for distribution to common stockholders and to evaluate its progress toward meeting this objective. The Company calculates earnings available for distribution as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; TBA dollar roll income; (gain) loss on foreign currency transactions, net; amortization of net deferred (gain) loss on de-designated interest rate swaps; and net (gain) loss on extinguishment of debt.

By excluding the gains and losses discussed above, the Company believes the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate its results over multiple reporting periods and, to a certain extent, compare to its peer companies. However, because not all of the Company’s peer companies use identical operating performance measures, the Company’s presentation of earnings available for distribution may not be comparable to other similarly titled measures used by its peer companies. The Company excludes the impact of gains and losses when calculating earnings available for distribution because (i) when analyzed in conjunction with its U.S. GAAP results, earnings available for distribution provides additional detail of its investment portfolio’s earnings capacity and (ii) gains and losses are not accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses are reflected in net income whereas other gains and losses are reflected in other comprehensive income. For example, a portion of the Company’s mortgage-backed securities are classified as available-for-sale securities, and changes in the valuation of these securities are recorded in other comprehensive income on its condensed consolidated balance sheets. The Company elected the fair value option for its mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in the condensed consolidated statements of operations. In addition, certain gains and losses represent one-time events. The Company may add and has added additional reconciling items to its earnings available for distribution calculation as appropriate. 

To maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. The Company has historically distributed at least 100% of its REIT taxable income. Because the Company views earnings available for distribution as a consistent measure of its investment portfolio’s ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company’s board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company’s taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs.

Earnings available for distribution is an incomplete measure of the Company’s financial performance and there are other factors that impact the achievement of the Company’s business objective. The Company cautions that earnings available for distribution should not be considered as an alternative to net income (determined in accordance with U.S. GAAP), or as an indication of the Company’s cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of the Company’s liquidity, or as an indication of amounts available to fund its cash needs.

The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods:


Three Months Ended


Six Months
Ended


$ in thousands, except per share data


June 30,
2021


March 31,
2021


June 30,
2021

Net income (loss) attributable to common stockholders

(88,340)

(20,382)

(108,722)

Adjustments:

(Gain) loss on investments, net

(72,620)

331,857

259,237

Realized (gain) loss on derivative instruments, net (1)

155,947

(282,250)

(126,303)

Unrealized (gain) loss on derivative instruments, net (1)

25,765

(9,260)

16,505

TBA dollar roll income (2)

9,680

10,545

20,225

(Gain) loss on foreign currency transactions, net (3)

(16)

16

—

Amortization of net deferred (gain) loss on de-designated interest rate swaps (4)

(5,429)

(5,368)

(10,797)

Subtotal

113,327

45,540

158,867

Earnings available for distribution

24,987

25,158

50,145

Basic income (loss) per common share

(0.34)

(0.09)

(0.45)

Earnings available for distribution per common share (5)

0.10

0.11

0.21

(1)

U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components:

 


Three Months Ended

 


Six Months
Ended


$ in thousands


 
June 30,

2021


 
March 31,

2021


June 30,

2021

Realized gain (loss) on derivative instruments, net

(155,947)

282,250

126,303

Unrealized gain (loss) on derivative instruments, net

(25,765)

9,260

(16,505)

Contractual net interest income (expense) on interest rate swaps

(4,572)

(4,549)

(9,121)

Gain (loss) on derivative instruments, net

(186,284)

286,961

100,677

(2)

A TBA dollar roll is a series of derivative transactions where TBAs with the same specified issuer, term and coupon but different settlement dates are simultaneously bought and sold. The TBA settling in the later month typically prices at a discount to the TBA settling in the earlier month. TBA dollar roll income represents the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement. The Company includes TBA dollar roll income in earnings available for distribution because it is the economic equivalent of interest income on the underlying Agency securities, less an implied financing cost, over the forward settlement period. TBA dollar roll income is a component of gain (loss) on derivative instruments, net on the Company’s condensed consolidated statements of operations.

(3)

Gain (loss) on foreign currency transactions, net is included in other investment income (loss) net on the condensed consolidated statements of operations.

(4)

U.S. GAAP repurchase agreements interest expense on the condensed consolidated statements of operations includes the following components:

 


Three Months Ended


Six Months
Ended


$ in thousands


June 30,

2021


March 31,

2021


June 30,

2021

Interest expense on repurchase agreement borrowings

2,252

3,708

5,960

Amortization of net deferred (gain) loss on de-designated interest rate swaps

(5,429)

(5,368)

(10,797)

Repurchase agreements interest expense

(3,177)

(1,660)

(4,837)

(5)   Earnings available for distribution per common share is equal to earnings available for distribution divided by the basic weighted average number of common shares outstanding.

The table below presents the components of earnings available for distribution:


Three Months Ended


Six Months
Ended


$ in thousands


June 30,

2021


 
March 31,

2021


June 30,

2021

Effective net interest income (1)

36,330

31,753

68,083

TBA dollar roll income

9,680

10,545

20,225

Equity in earnings (losses) of unconsolidated ventures

331

(94)

237

(Increase) decrease in provision for credit losses

830

938

1,768

Total expenses

(7,602)

(6,877)

(14,479)

Subtotal

39,569

36,265

75,834

Dividends to preferred stockholders

(9,900)

(11,107)

(21,007)

Issuance and redemption costs of redeemed preferred stock

(4,682)

—

(4,682)

Earnings available for distribution

24,987

25,158

50,145

(1)

See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.

Effective Interest Income/Effective Yield/Effective Interest Expense/Effective Cost of Funds/Effective Net Interest Income/Effective Interest Rate Margin

Prior to 2021, the Company calculated effective interest income (and by calculation, effective yield) as U.S. GAAP total interest income adjusted for GSE CRT embedded derivative coupon interest that was recorded as realized and unrealized credit derivative income (loss), net. The Company included its GSE CRT embedded derivative coupon interest in effective interest income because GSE CRT coupon interest was not accounted for consistently under U.S. GAAP. The Company accounted for GSE CRTs purchased prior to August 24, 2015 as hybrid financial instruments, but elected the fair value option for GSE CRTs purchased on or after August 24, 2015. Under U.S. GAAP, coupon interest on GSE CRTs accounted for using the fair value option was recorded as interest income, whereas coupon interest on GSE CRTs accounted for as hybrid financial instruments was recorded as realized and unrealized credit derivative income (loss). The Company added back GSE CRT embedded derivative coupon interest to its total interest income because the Company considered GSE CRT embedded derivative coupon interest a current component of its total interest income irrespective of whether the Company elected the fair value option for the GSE CRT or accounted for the GSE CRT as a hybrid financial instrument. Effective interest income was equal to total interest income for the three and six months ended June 30, 2021 because the Company sold all of its GSE CRTs that were accounted for as hybrid financial instruments during 2020.

The Company calculates effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net and the amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as repurchase agreements interest expense. The Company views its interest rate swaps as an economic hedge against increases in future market interest rates on its floating rate borrowings. The Company adds back the net payments it makes on its interest rate swap agreements to its total U.S. GAAP interest expense because the Company uses interest rate swaps to add stability to interest expense. The Company excludes the amortization of net deferred gains (losses) on de-designated interest rate swaps from its calculation of effective interest expense because the Company does not consider the amortization a current component of its borrowing costs.

The Company calculates effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net; amortization of net deferred gains (losses) on de-designated interest rate swaps that is recorded as repurchase agreements interest expense and GSE CRT embedded derivative coupon interest that was recorded as realized and unrealized credit derivative income (loss), net.

The Company believes the presentation of effective interest income, effective yield, effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provides information that is useful to investors in understanding the Company’s borrowing costs and operating performance.

The following tables reconcile total interest income to effective interest income and yield to effective yield for the following periods:


Three Months Ended


June 30, 2021


March 31, 2021


June 30, 2020


$ in thousands


Reconciliation


Yield/Effective
Yield


Reconciliation


Yield/Effective
Yield


Reconciliation


Yield/Effective
Yield

Total interest income

43,154

1.96

%

40,010

1.72

%

30,173

6.33

%

Add: GSE CRT embedded derivative 
        coupon interest recorded as 
        realized and unrealized credit 
        derivative income (loss), net

—

—

%

—

—

%

1,127

0.24

%

Effective interest income

43,154

1.96

%

40,010

1.72

%

31,300

6.57

%

 


Six Months Ended June 30,


2021


2020


$ in thousands


Reconciliation


Yield/Effective
Yield


Reconciliation


Yield/Effective
Yield

Total interest income

83,164

1.83

%

216,872

4.39

%

Add: GSE CRT embedded derivative coupon interest recorded as 
        realized and unrealized credit derivative income (loss), net

—

—

%

5,845

0.12

%

Effective interest income

83,164

1.83

%

222,717

4.51

%

The following tables reconcile total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods:


Three Months Ended


June 30, 2021


March 31, 2021


June 30, 2020


$ in thousands


Reconciliation


Cost of Funds /
Effective Cost
of Funds


Reconciliation


Cost of Funds /
Effective Cost
of Funds


Reconciliation


Cost of Funds /
Effective Cost
of Funds

Total interest expense

(3,177)

(0.16)

%

(1,660)

(0.08)

%

442

0.18

%

Add: Amortization of net deferred 
        gain (loss) on de-designated

        interest rate swaps

5,429

0.27

%

5,368

0.26

%

4,503

1.83

%

Add (Less): Contractual net interest 
        expense (income) on interest 
        rate swaps recorded as gain 
        (loss) on derivative instruments, 
        net

4,572

0.23

%

4,549

0.22

%

—

—

%

Effective interest expense

6,824

0.34

%

8,257

0.40

%

4,945

2.01

%

 


Six Months Ended June 30,


2021


2020


$ in thousands


Reconciliation


Cost of Funds /
Effective Cost
of Funds


Reconciliation


Cost of Funds /
Effective Cost
of Funds

Total interest expense

(4,837)

(0.12)

%

86,130

1.97

%

Add: Amortization of net deferred gain (loss) on de-designated 
        interest rate swaps

10,797

0.27

%

14,570

0.33

%

Add (Less): Contractual net interest expense (income) on interest 
        rate swaps recorded as gain (loss) on derivative instruments, 
        net

9,121

0.22

%

(11,924)

(0.27)

%

Effective interest expense

15,081

0.37

%

88,776

2.03

%

The following tables reconcile net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods:


Three Months Ended


June 30, 2021


March 31, 2021


June 30, 2020


$ in thousands


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest


Rate Margin /
Effective
Interest Rate
Margin

Net interest income

46,331

2.12

%

41,670

1.80

%

29,731

6.15

%

Less: Amortization of net deferred 
        (gain) loss on de-designated 
        interest rate swaps

(5,429)

(0.27)

%

(5,368)

(0.26)

%

(4,503)

(1.83)

%

Add: GSE CRT embedded derivative 
        coupon interest recorded as 
        realized and unrealized credit 
        derivative income (loss), net

—

—

%

—

—

%

1,127

0.24

%

Add (Less): Contractual net interest 
        income (expense) on interest 
        rate swaps recorded as gain 
        (loss) on derivative instruments, 
        net

(4,572)

(0.23)

%

(4,549)

(0.22)

%

—

—

%

Effective net interest income

36,330

1.62

%

31,753

1.32

%

26,355

4.56

%

 


Six Months Ended June 30,


2021


2020


$ in thousands


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin


Reconciliation


Net Interest
Rate Margin /
Effective
Interest Rate
Margin

Net interest income

88,001

1.95

%

130,742

2.42

%

Less: Amortization of net deferred (gain) loss on de-designated 
        interest rate swaps

(10,797)

(0.27)

%

(14,570)

(0.33)

%

Add: GSE CRT embedded derivative coupon interest recorded as 
        realized and unrealized credit derivative income (loss), net

—

—

%

5,845

0.12

%

Add (Less): Contractual net interest income (expense) on interest 
        rate swaps recorded as gain (loss) on derivative instruments, 
        net

(9,121)

(0.22)

%

11,924

0.27

%

Effective net interest income

68,083

1.46

%

133,941

2.48

%

Economic Debt-to-Equity Ratio

The following tables show the allocation of the Company’s stockholders’ equity to its target assets, the Company’s debt-to-equity ratio, and the Company’s economic debt-to-equity ratio as of June 30, 2021 and March 31, 2021. The Company’s debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt to total stockholders’ equity.

The Company presents an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of its investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. The Company includes its TBAs at implied cost basis in its measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing the Company’s on-balance sheet funding commitments. The Company believes that presenting its economic debt-to-equity ratio, when considered together with its U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates at-risk leverage and gives investors a comparable statistic to those other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage.

June 30, 2021


$ in thousands


Agency RMBS


Credit Portfolio (1)


Total

Mortgage-backed securities

8,657,030

73,633

8,730,663

Cash and cash equivalents (2)

134,664

—

134,664

Restricted cash (3)

353,386

—

353,386

Derivative assets, at fair value (3)

3,980

437

4,417

Other assets

18,157

35,413

53,570

Total assets

9,167,217

109,483

9,276,700

Repurchase agreements

7,851,204

—

7,851,204

Derivative liabilities, at fair value (3)

17,242

20

17,262

Other liabilities

31,404

3,451

34,855

Total liabilities

7,899,850

3,471

7,903,321

Total stockholders’ equity (allocated)

1,267,367

106,012

1,373,379

Debt-to-equity ratio (4)

6.2

—

5.7

Economic debt-to-equity ratio (5)

7.4

—

6.8

(1)

Investments in non-Agency CMBS, non-Agency RMBS, a commercial loan and unconsolidated joint ventures are included in credit portfolio.

(2)

Cash and cash equivalents is allocated based on the Company’s financing strategy for each asset class.

(3)

Restricted cash and derivative assets and liabilities are allocated based on the hedging strategy for each asset class.

(4)

Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders’ equity.

(5)

Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis ($1.5 billion as of June 30, 2021) to total stockholders’ equity.

March 31, 2021


$ in thousands


Agency RMBS


Credit Portfolio (1)


Total

Mortgage-backed securities

8,997,918

101,824

9,099,742

Cash and cash equivalents (2)

198,357

—

198,357

Restricted cash (3)

380,678

—

380,678

Derivative assets, at fair value (3)

16,634

559

17,193

Other assets

30,340

36,526

66,866

Total assets

9,623,927

138,909

9,762,836

Repurchase agreements

8,240,887

—

8,240,887

Derivative liabilities, at fair value (3)

4,273

—

4,273

Other liabilities

31,155

4,589

35,744

Total liabilities

8,276,315

4,589

8,280,904

Total stockholders’ equity (allocated)

1,347,612

134,320

1,481,932

Debt-to-equity ratio (4)

6.1

—

5.6

Economic debt-to-equity ratio (5)

7.3

—

6.6

(1)

Investments in non-Agency CMBS, non-Agency RMBS, a commercial loan and unconsolidated joint ventures are included in credit portfolio.

(2)

Cash and cash equivalents is allocated based on the Company’s financing strategy for each asset class.

(3)

Restricted cash and derivative assets and liabilities are allocated based on the hedging strategy for each asset class.

(4)

Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders’ equity.

(5)

Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis ($1.5 billion as of March 31, 2021) to total stockholders’ equity.

Average Balances

The table below presents information related to the Company’s average earning assets, average earning assets yields, average borrowings and average cost of funds for the following periods:


Three Months Ended


Six Months Ended


$ in thousands


 
June 30,

2021


 
March 31,

2021


June 30,

2020


June 30,

2021


June 30,

2020

Average earning assets (1)

8,829,072

9,330,134

1,905,555

9,078,218

9,871,653

Average earning asset yields (2)

1.96

%

1.72

%

6.33

%

1.83

%

4.39

%

Average borrowings (3)

7,945,877

8,347,354

981,992

8,145,507

8,756,995

Average cost of funds (4)

(0.16)

%

(0.08)

%

0.18

%

(0.12)

%

1.97

%

(1)

Average balances for each period are based on weighted month-end balances.

(2)

Average earning asset yields for each period are calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.

(3)

Average borrowings for each period are based on weighted month-end balances.

(4)

Average cost of funds is calculated by dividing annualized interest expense including amortization of net deferred gain (loss) on de-designated interest rate swaps by the Company’s average borrowings.

 

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SOURCE Invesco Mortgage Capital Inc.

Posted on

Albemarle Reports Second-Quarter Results

PR Newswire

CHARLOTTE, N.C., Aug. 4, 2021 /PRNewswire/ — Albemarle Corporation (NYSE: ALB) today announced its results for the second quarter ended June 30, 2021.

Second Quarter 2021 Highlights

(Unless otherwise stated, all percent changes are based on year-over-year comparisons)

  • Net income of $424.6 million, or $3.62 per diluted share, including a gain on the sale of Fine Chemistry Services (FCS) business
  • Adjusted diluted EPS of $0.89, an increase of 4%
  • Net sales of $773.9 million, an increase of 1%; Net sales increased 5% excluding FCS
  • Adjusted EBITDA of $194.6 million, an increase of 5%; Adjusted EBITDA increased 13% excluding FCS
  • Full year 2021 outlook revised to reflect better than expected Lithium performance, lower interest expense and tax rates, offset by higher Bromine raw material costs and supply chain disruptions; guidance updated to reflect sale of FCS
  • Completed the sale of FCS on June 1, 2021, in a cash and stock transaction valued at ~$570 million
  • La Negra III/IV commissioning stage in process, commercial production expected to begin in first half of 2022

“Albemarle delivered another strong quarter, generating $195 million in adjusted EBITDA, driven by continued strength in demand for our Lithium and Bromine products,” said Albemarle CEO Kent Masters. “We are focused on executing our accelerated growth strategy. We are in the final stages of two lithium projects which are expected to double our nameplate capacity to about 175,000 metric tons, including La Negra III/IV where construction is complete and commissioning is progressing. We are firmly focused on advancing all our lithium projects to meet customer demand and accelerate profitable growth.”

Outlook

The company continues to expect a modest improvement in operating performance compared to full year 2020, assuming continued global economic recovery. Full-year 2021 net sales guidance is improved compared to previous guidance primarily due to increased Lithium sales and improving Catalysts trends offset by reduced expectations for the Bromine business as a result of higher raw material costs and supply chain disruptions.  Revised EBITDA reflects higher net sales offset by higher corporate costs, primarily related to incentive compensation expense and foreign exchange.  Higher EPS and net cash from operations reflects lower interest expense and tax rates.  Net cash from operations is also expected to benefit from timing of working capital changes.  Capital expenditures are trending near the high-end of the range, due to tighter labor markets and COVID-related travel restrictions in Western Australia.  Pro forma revised guidance has been updated to reflect the sale of Albemarle’s Fine Chemistry Services (FCS) business to W. R. Grace, which closed on June 1, 2021.


Revised


FCS Adjustment


Pro Forma Revised


FY 2021 Guidance


(Jun 1 – Dec 31, 2021)


FY 2021 Guidance

Net sales

$3.3 – $3.4 billion

$95 – $105 million

$3.2 – $3.3 billion

Adjusted EBITDA

$810 – $860 million

$35 – $45 million

$775 – $815 million

Adjusted EBITDA Margin

24% – 25%

24% – 25%

Adjusted Diluted EPS

$3.60 – $4.00

$0.25 – $0.30

$3.35 – $3.70

Net Cash from Operations

$590 – $690 million

$40 – $45 million

$550 – $650 million

Capital Expenditures

$850 – $950 million

$4 – $8 million

$850 – $950 million

COVID-19 Response

Albemarle’s cross-functional Global Response Team continues to meet regularly to address employee health and safety and operational challenges. The company’s priority is always the health and well-being of its employees, customers, and communities. The company continues to focus on building in the flexibility needed to adjust for regional differences and changing conditions.  

Second-Quarter Results


In millions, except per share amounts


Q2 2021


Q2 2020


$ Change


% Change

Net sales

$

773.9

$

764.0

$

9.8

1.3

%

Net income attributable to Albemarle Corporation

$

424.6

$

85.6

$

339.0

395.9

%

Adjusted EBITDA(a)

$

194.6

$

185.2

$

9.4

5.1

%

Diluted earnings per share

$

3.62

$

0.80

$

2.82

352.5

%

   Non-operating pension and OPEB items(a)

(0.04)

(0.02)

   Non-recurring and other unusual items(a)

(2.69)

0.07

Adjusted diluted earnings per share(b)

$

0.89

$

0.86

$

0.03

3.5

%

(a)

See Non-GAAP Reconciliations for further details.

(b)

Totals may not add due to rounding.

Net sales of $773.9 million increased by $9.8 million compared to the prior year quarter, primarily driven by an increase in sales from the company’s Lithium and Bromine business segments. Excluding the FCS business, net sales for the quarter increased 5% year-over-year.

Adjusted EBITDA of $194.6 million increased by $9.4 million from the prior year quarter based on higher sales and operating margins, partially offset by higher corporate expense primarily related to higher incentive compensation and foreign exchange. Excluding FCS, adjusted EBITDA was 13% higher when compared to the second quarter of 2020. Net income attributable to Albemarle of $424.6 million increased by $339.0 million, benefiting from a $429.4 million ($331.6 million after taxes) gain on the sale of the company’s FCS business.  

The effective income tax rate for the second quarter of 2021 was 20.0% compared to 17.5% in the same period of 2020. The difference is largely due to tax expense recorded in the second quarter of 2021 for the gain on the sale of the FCS business. On an adjusted basis, the effective income tax rates were 17.5% and 18.9% for the second quarter of 2021 and 2020, respectively.

Business Segment Results

Lithium


In millions


Q2 2021


Q2 2020


$ Change


% Change

Net Sales

$

320.3

$

283.7

$

36.6

12.9

%

Adjusted EBITDA

$

109.4

$

94.5

$

14.9

15.8

%

Lithium net sales of $320.3 million increased $36.6 million (+13%) primarily driven by higher volumes (+17%) primarily related to accelerated orders under long-term agreements. Pricing in the quarter was slightly lower year over year (-4%) due to lower average pricing for carbonate and technical grade products. Adjusted EBITDA of $109.4 million increased $14.9 million primarily due to increased net sales and the impact of higher spodumene volumes at the Talison joint venture.


Current Trends:
 Full-year 2021 volume growth is expected to be in the mid-teens year-over-year due to North American plant restarts, productivity improvements, and tolling. Average realized pricing is expected to increase sequentially but remain flat compared to 2020. Full-year 2021 adjusted EBITDA is expected to grow between 10% and 15% year over year. Full-year 2021 average margin is expected to remain below 35% due to higher lithium costs related to project start-ups and tolling costs partially offset by efficiency improvements.

Albemarle’s Wave 2 growth projects continue to progress.  La Negra III/IV is in the commissioning phase and Kemerton I remains on track for construction completion later this year. To mitigate risks related to labor shortages and COVID-19 travel restrictions in Western Australia, the company prioritized completion of Kemerton I, with Kemerton II construction completion now expected by the end of the first quarter 2022. Kemerton I and II are expected to reach commercial production in 2022 following an approximately six month commissioning and qualification period.     

Bromine Specialties


In millions


Q2 2021


Q2 2020


$ Change


% Change

Net Sales

$

279.7

$

232.8

$

47.0

20.2

%

Adjusted EBITDA

$

92.6

$

73.0

$

19.6

26.8

%

Bromine net sales of $279.7 million increased $47.0 million (+20%) with improved pricing (+9%) and volumes (+11%) driven by higher demand across the portfolio.  Adjusted EBITDA of $92.6 million increased $19.6 million due to higher net sales. Cost savings initiatives and higher pricing helped offset raw materials cost increases.    


Current Trends:
 The company expects full-year 2021 adjusted EBITDA growth in the mid-single digits year-over-year, below previous outlook primarily due to a force majeure declaration by our chlorine supplier in the U.S. The company continues to see strength in certain end markets, including electronics, and building and construction. Volumes are also expected to be lower in the second half due to inventory drawdown and reduced production related to the U.S. Gulf Coast winter storms in the first quarter of 2021. Cost savings and higher pricing partially offset inflation in raw materials and freight.   

Catalysts


In millions


Q2 2021


Q2 2020


$ Change


% Change

Net Sales

$

148.3

$

197.1

$

(48.7)

(24.7)

%

Adjusted EBITDA

$

21.2

$

22.8

$

(1.6)

(7.1)

%

Catalysts net sales of $148.3 million decreased $48.7 million (-25%) compared to the previous year, primarily due to lower volumes (-25%) while pricing was flat. Clean Fuels Technologies (CFT) volumes decreased due to timing of shipments. Fluid Catalytic Cracking (FCC) volumes were down slightly versus prior year, as a change in order patterns from a large North American customer offset generally higher FCC demand.  Performance Catalyst Solutions (PCS) results improved due to product mix. Adjusted EBITDA of $21.2 million declined $1.6 million mostly due to lower sales. Also, second quarter 2020 results were understated by $12.0 million due to an out-of-period correction to cost of goods sold for inventory values.


Current Trends:
  The company continues to expect full-year 2021 adjusted EBITDA to decline by between 30% and 40%.  Market conditions are improving, but results are expected to be down from prior year primarily due to the impact of the U.S. Gulf Coast winter storm, product mix, and the previously disclosed change in order patterns from a large North American customer.

All Other


In millions


Q2 2021


Q2 2020


$ Change


% Change

Net Sales

$

25.5

$

50.5

$

(25.0)

(49.6)

%

Adjusted EBITDA

$

8.4

$

18.6

$

(10.2)

(54.9)

%

Other operations represents the company’s recently sold FCS business. FCS net sales of $25.5 million declined $25.0 million and adjusted EBITDA of $8.4 million declined $10.2 million. Second-quarter 2021 results include only two months of performance following the sale of FCS on June 1, 2021. Albemarle recorded a gain of $429.4 million ($331.6 million after taxes) related to the sale of the FCS business.

Balance Sheet and Liquidity

As of June 30, 2021, Albemarle had estimated liquidity of approximately $2.2 billion, including $823.6 million of cash and equivalents, the full $1.0 billion available under the company’s revolver, $270.0 million remaining under its delayed draw term loan and $132.0 million on other available credit lines. Total debt was $2.0 billion, representing net debt to adjusted EBITDA of approximately 1.5 times.

Cash Flow and Capital Deployment

Cash from operations for the six months ended June 30, 2021, of $385.9 million increased $177.9 million versus the prior year driven by working capital inflows and higher revenues in the company’s Lithium and Bromine segments. Capital expenditures of $396.9 million decreased by approximately $22.0 million versus the prior year as the company nears completion of its Wave 2 Lithium expansion projects.

Albemarle’s primary capital allocation priorities are to grow profitably, fund its dividend, and maintain its financial flexibility and our Investment Grade credit rating. 

In May, the board declared a quarterly dividend of $0.39 per share, an increase over the quarterly dividend paid in 2020. This is Albemarle’s 27th consecutive year of dividend increases. The share repurchase authorization remains in place; however, the company has no near-term plans to execute share buybacks.

Earnings Call

Date:

Thursday, August 5, 2021

Time:

9:00 AM Eastern time

Dial-in (U.S.):

844-347-1034

Dial-in (International):

209-905-5910

Passcode:

6747789

The company’s earnings presentation and supporting material are available on Albemarle’s website at https://investors.albemarle.com.

About Albemarle

Albemarle Corporation (NYSE: ALB) is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We think beyond business-as-usual to power the potential of companies in many of the world’s largest and most critical industries, such as energy, electronics, and transportation. We actively pursue a sustainable approach to managing our diverse global footprint of world-class resources. In conjunction with our highly experienced and talented global teams, our deep-seated values, and our collaborative customer relationships, we create value-added and performance-based solutions that enable a safer and more sustainable future.

We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

Forward-Looking Statements

Some of the information presented in this press release, the conference call and discussions that follow, including, without limitation, information related to the timing of active and proposed projects, product development, production capacity, committed volumes, market trends, pricing, financial flexibility, expected growth, anticipated return on opportunities, earnings and demand for our products, input costs, productivity improvements, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, future acquisition and divestiture transactions, expected benefits from proposed transactions, economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause actual results to differ materially from the outlook expressed or implied in any forward-looking statement include, without limitation: changes in economic and business conditions; changes in financial and operating performance of our major customers and industries and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in the demand for our products or the end-user markets in which our products are sold; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; increases in the cost of raw materials and energy, and our ability to pass through such increases to our customers; changes in our markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting our operations or our products; the occurrence of regulatory actions, proceedings, claims or litigation; the occurrence of cyber-security breaches, terrorist attacks, industrial accidents, natural disasters or climate change; hazards associated with chemicals manufacturing; the inability to maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest affecting the global economy, including adverse effects from terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions we may make in the future; the ability to successfully execute, operate and integrate acquisitions and divestitures; uncertainties as to the duration and impact of the coronavirus (COVID-19) pandemic; and the other factors detailed from time to time in the reports we file with the SEC, including those described under “Risk Factors” in our most recent Annual Report on Form 10-K any subsequently filed Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. We assume no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

 

Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2021


2020


2021


2020


Net sales

$

773,896

$

764,049

$

1,603,187

$

1,502,894

Cost of goods sold

525,479

530,690

1,091,083

1,027,517


Gross profit

248,417

233,359

512,104

475,377

Selling, general and administrative expenses

121,516

106,949

214,703

208,826

Research and development expenses

13,976

14,210

28,612

30,307

Gain on sale of business

(429,408)

—

(429,408)

—


Operating profit

542,333

112,200

698,197

236,244

Interest and financing expenses

(7,152)

(17,852)

(51,034)

(34,737)

Other income (expense), net

14

(6,273)

11,326

2,041

Income before income taxes and equity in net income of unconsolidated investments

535,195

88,075

658,489

203,548

Income tax expense

106,985

15,431

129,092

33,873

Income before equity in net income of unconsolidated investments

428,210

72,644

529,397

169,675

Equity in net income of unconsolidated investments (net of tax)

17,998

31,114

34,509

57,718

Net income

446,208

103,758

563,906

227,393

Net income attributable to noncontrolling interests

(21,608)

(18,134)

(43,629)

(34,565)

Net income attributable to Albemarle Corporation

$

424,600

$

85,624

$

520,277

$

192,828

Basic earnings per share

$

3.63

$

0.81

$

4.54

$

1.81

Diluted earnings per share

$

3.62

$

0.80

$

4.51

$

1.81

Weighted-average common shares outstanding – basic

116,809

106,329

114,700

106,278

Weighted-average common shares outstanding – diluted

117,436

106,535

115,383

106,524

 

Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)


June 30,


December 31,


2021


2020


ASSETS

Current assets:

Cash and cash equivalents

$

823,572

$

746,724

Trade accounts receivable

455,222

530,838

Other accounts receivable

58,256

61,958

Inventories

732,563

750,237

Other current assets

81,741

116,427

Total current assets

2,151,354

2,206,184

Property, plant and equipment

7,596,684

7,427,641

Less accumulated depreciation and amortization

2,086,085

2,073,016

Net property, plant and equipment

5,510,599

5,354,625

Investments

907,080

656,244

Other assets

256,081

219,268

Goodwill

1,640,720

1,665,520

Other intangibles, net of amortization

331,092

349,105

Total assets

$

10,796,926

$

10,450,946


LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

535,153

$

483,221

Accrued expenses

317,954

440,763

Current portion of long-term debt

623

804,677

Dividends payable

45,428

40,937

Income taxes payable

85,770

32,251

Total current liabilities

984,928

1,801,849

Long-term debt

2,043,794

2,767,381

Postretirement benefits

47,371

48,075

Pension benefits

309,712

340,818

Other noncurrent liabilities

616,912

629,377

Deferred income taxes

428,438

394,852

Commitments and contingencies

Equity:

Albemarle Corporation shareholders’ equity:

Common stock

1,169

1,069

Additional paid-in capital

2,907,981

1,438,038

Accumulated other comprehensive loss

(328,001)

(326,132)

Retained earnings

3,584,400

3,155,252

Total Albemarle Corporation shareholders’ equity

6,165,549

4,268,227

Noncontrolling interests

200,222

200,367

Total equity

6,365,771

4,468,594

Total liabilities and equity

$

10,796,926

$

10,450,946

 

Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)


Six Months Ended


June 30,


2021


2020

Cash and cash equivalents at beginning of year

$

746,724

$

613,110

Cash flows from operating activities:

Net income

563,906

227,393

Adjustments to reconcile net income to cash flows from operating activities:

Depreciation and amortization

123,683

111,535

Gain on sale of business

(429,408)

—

Stock-based compensation and other

8,425

9,765

Equity in net income of unconsolidated investments (net of tax)

(34,509)

(57,718)

Dividends received from unconsolidated investments and nonmarketable securities

27,420

12,984

Pension and postretirement benefit

(8,465)

(3,312)

Pension and postretirement contributions

(20,266)

(6,692)

Unrealized gain on investments in marketable securities

(2,384)

(1,278)

Loss on early extinguishment of debt

28,955

—

Deferred income taxes

27,708

8,990

Working capital changes

7,942

(156,579)

Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL

96,185

87,750

Other, net

(3,339)

(24,921)

Net cash provided by operating activities

385,853

207,917

Cash flows from investing activities:

Acquisitions, net of cash acquired

—

(22,572)

Capital expenditures

(396,915)

(418,991)

Cash proceeds from divestitures, net

290,467

—

Sales of marketable securities, net

4,553

1,496

Investments in equity and other corporate investments

(286)

(486)

Net cash used in investing activities

(102,181)

(440,553)

Cash flows from financing activities:

Proceeds from issuance of common stock

1,453,888

—

Repayments of long-term debt and credit agreements

(1,173,823)

—

Proceeds from borrowings of credit agreements

—

452,163

Other debt repayments, net

(325,316)

12,956

Fees related to early extinguishment of debt

(24,877)

—

Dividends paid to shareholders

(86,637)

(79,909)

Dividends paid to noncontrolling interests

(43,698)

(14,286)

Proceeds from exercise of stock options

14,335

10,809

Withholding taxes paid on stock-based compensation award distributions

(7,047)

(4,019)

Other

(1,359)

(2,669)

Net cash (used in) provided by financing activities

(194,534)

375,045

Net effect of foreign exchange on cash and cash equivalents

(12,290)

(18,823)

Increase in cash and cash equivalents

76,848

123,586

Cash and cash equivalents at end of period

$

823,572

$

736,696

 

Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2021


2020


2021


2020


Net sales:

Lithium

$

320,334

$

283,722

$

599,310

$

520,540

Bromine Specialties

279,748

232,779

560,195

464,371

Catalysts

148,344

197,053

368,587

404,260

All Other

25,470

50,495

75,095

113,723

Total net sales

$

773,896

$

764,049

$

1,603,187

$

1,502,894


Adjusted EBITDA:

Lithium

$

109,441

$

94,536

$

215,877

$

173,173

Bromine Specialties

92,646

73,041

187,286

156,303

Catalysts

21,164

22,777

46,591

70,247

All Other

8,379

18,598

29,858

41,422

Corporate

(37,002)

(23,759)

(54,930)

(59,587)

Total adjusted EBITDA

$

194,628

$

185,193

$

424,682

$

381,558

See accompanying non-GAAP reconciliations below.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These non-GAAP measures should not be considered as alternatives to Net income attributable to Albemarle Corporation (“earnings”) or other comparable measures calculated and reported in accordance with GAAP. These measures are presented here to provide additional useful measurements to review the company’s operations, provide transparency to investors and enable period-to-period comparability of financial performance. The company’s chief operating decision maker uses these measures to assess the ongoing performance of the company and its segments, as well as for business and enterprise planning purposes.

A description of other non-GAAP financial measures that Albemarle uses to evaluate its operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP can be found on the following pages of this press release, which is also is available on Albemarle’s website at https://investors.albemarle.com. The company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the company’s results calculated in accordance with GAAP.


ALBEMARLE CORPORATION AND SUBSIDIARIES

Non-GAAP Reconciliations

(Unaudited)

See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net income attributable to Albemarle Corporation (“earnings”), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted earnings is defined as earnings before the non-recurring, other unusual and non-operating pension and other post-employment benefit (OPEB) items as listed below. The non-recurring and unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges and other significant non-recurring items. EBITDA is defined as earnings before interest and financing expenses, income taxe expense, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus or minus the non-recurring, other unusual and non-operating pension and OPEB items as listed below.


Three Months Ended


Six Months Ended


June 30,


June 30,


In thousands, except percentages and per share amounts


2021


2020


2021


2020

Net income attributable to Albemarle Corporation

$

424,600

$

85,624

$

520,277

$

192,828

Add back:

Non-operating pension and OPEB items (net of tax)

(4,273)

(2,299)

(8,540)

(4,610)

Non-recurring and other unusual items (net of tax)

(315,996)

7,907

(283,235)

9,400

Adjusted net income attributable to Albemarle Corporation

$

104,331

$

91,232

$

228,502

$

197,618

Adjusted diluted earnings per share

$

0.89

$

0.86

$

1.98

$

1.86

Weighted-average common shares outstanding – diluted

117,436

106,535

115,383

106,524

Net income attributable to Albemarle Corporation

$

424,600

$

85,624

$

520,277

$

192,828

Add back:

Interest and financing expenses

7,152

17,852

51,034

34,737

Income tax expense

106,985

15,431

129,092

33,873

Depreciation and amortization

61,423

57,841

123,683

111,535


EBITDA

600,160

176,748

824,086

372,973

Non-operating pension and OPEB items

(5,471)

(2,895)

(10,936)

(5,803)

Non-recurring and other unusual items

(400,061)

11,340

(388,468)

14,388


Adjusted EBITDA

$

194,628

$

185,193

$

424,682

$

381,558

Net sales

$

773,896

$

764,049

$

1,603,187

$

1,502,894

EBITDA margin

77.6

%

23.1

%

51.4

%

24.8

%

Adjusted EBITDA margin

25.1

%

24.2

%

26.5

%

25.4

%

 

See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).


Lithium


Bromine
Specialties


Catalysts


Reportable
Segments
Total


All
Other


Corporate


Consolidated
Total


% of
Net
Sales


Three months ended June 30, 2021

Net income (loss) attributable to Albemarle Corporation

$

74,593

$

80,148

$

8,446

$

163,187

$

7,972

$

253,441

$

424,600

54.9

%

Depreciation and amortization

33,497

12,498

12,718

58,713

407

2,303

61,423

7.9

%

Non-recurring and other unusual items

1,351

—

—

1,351

—

(401,412)

(400,061)

(51.7)

%

Interest and financing expenses

—

—

—

—

—

7,152

7,152

0.9

%

Income tax expense

—

—

—

—

—

106,985

106,985

13.8

%

Non-operating pension and OPEB items

—

—

—

—

—

(5,471)

(5,471)

(0.7)

%


Adjusted EBITDA

$

109,441

$

92,646

$

21,164

$

223,251

$

8,379

$

(37,002)

$

194,628

25.1

%


Three months ended June 30, 2020

Net income (loss) attributable to Albemarle Corporation

$

66,038

$

60,692

$

10,702

$

137,432

$

16,425

$

(68,233)

$

85,624

11.2

%

Depreciation and amortization

28,498

12,349

12,075

52,922

2,173

2,746

57,841

7.6

%

Non-recurring and other unusual items

—

—

—

—

—

11,340

11,340

1.5

%

Interest and financing expenses

—

—

—

—

—

17,852

17,852

2.3

%

Income tax expense

—

—

—

—

—

15,431

15,431

2.1

%

Non-operating pension and OPEB items

—

—

—

—

—

(2,895)

(2,895)

(0.4)

%


Adjusted EBITDA

$

94,536

$

73,041

$

22,777

$

190,354

$

18,598

$

(23,759)

$

185,193

24.2

%


Six months ended June 30, 2021

Net income (loss) attributable to Albemarle Corporation

$

144,965

$

162,261

$

21,362

$

328,588

$

27,988

$

163,701

$

520,277

32.5

%

Depreciation and amortization

65,303

25,025

25,229

115,557

1,870

6,256

123,683

7.7

%

Non-recurring and other unusual items

5,609

—

—

5,609

—

(394,077)

(388,468)

(24.2)

%

Interest and financing expenses

—

—

—

—

—

51,034

51,034

3.2

%

Income tax expense

—

—

—

—

—

129,092

129,092

8.1

%

Non-operating pension and OPEB items

—

—

—

—

—

(10,936)

(10,936)

(0.7)

%


Adjusted EBITDA

$

215,877

$

187,286

$

46,591

$

449,754

$

29,858

$

(54,930)

$

424,682

26.5

%


Six months ended June 30, 2020

Net income (loss) attributable to Albemarle Corporation

$

119,278

$

132,357

$

45,594

$

297,229

$

37,271

$

(141,672)

$

192,828

12.8

%

Depreciation and amortization

53,895

23,946

24,653

102,494

4,151

4,890

111,535

7.4

%

Non-recurring and other unusual items

—

—

—

—

—

14,388

14,388

1.0

%

Interest and financing expenses

—

—

—

—

—

34,737

34,737

2.3

%

Income tax expense

—

—

—

—

—

33,873

33,873

2.3

%

Non-operating pension and OPEB items

—

—

—

—

—

(5,803)

(5,803)

(0.4)

%


Adjusted EBITDA

$

173,173

$

156,303

$

70,247

$

399,723

$

41,422

$

(59,587)

$

381,558

25.4

%

 

Non-operating pension and OPEB items, consisting of mark-to-market actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to Albemarle’s operating segments and are included in the Corporate category. In addition, the company believes that these components of pension cost are mainly driven by market performance, and the company manages these separately from the operational performance of the company’s businesses. In accordance with GAAP, these non-operating pension and OPEB items are included in Other income (expenses), net. Non-operating pension and OPEB items were as follows (in thousands):


Three Months Ended


Six Months Ended


June 30,


June 30,


2021


2020


2021


2020

Interest cost

$

5,430

$

7,133

$

10,858

$

14,288

Expected return on assets

(10,901)

(10,028)

(21,794)

(20,091)

Total

$

(5,471)

$

(2,895)

$

(10,936)

$

(5,803)

 

In addition to the non-operating pension and OPEB items disclosed above, the company has identified certain other items and excluded them from Albemarle’s adjusted net income calculation for the periods presented. A listing of these items, as well as a detailed description of each follows below (per diluted share):


Three Months Ended


Six Months Ended


June 30,


June 30,


2021


2020


2021


2020

Restructuring and other(1)

$

—

$

0.04

$

0.01

$

0.06

Acquisition and integration related costs(2)

0.01

0.04

0.03

0.06

Albemarle Foundation contribution(3)

0.13

—

0.13

—

Gain on sale of business(4)

(2.82)

—

(2.87)

—

Loss on early extinguishment of debt(5)

0.01

—

0.21

—

Other(6)

0.04

(0.01)

0.10

(0.02)

Discrete tax items(7)

(0.06)

—

(0.06)

(0.01)

Total non-recurring and other unusual items

$

(2.69)

$

0.07

$

(2.45)

$

0.09

(1)

During the three and six months ended June 30, 2021, Albemarle recorded facility closure costs related to offices in Germany, and severance expenses in Germany and Belgium, in Selling, general and administrative expenses of $0.8 million and $1.5 million ($0.5 million and $1.1 million after income taxes, or less than $0.01 and $0.01 per share), respectively. In 2020, Albemarle recorded severance expenses as part of business reorganization plans, impacting each of its businesses and Corporate, primarily in the U.S., Germany and with its Jordanian joint venture partner. During the three months ended June 30, 2020, the company recorded expenses of $6.7 million ($4.7 million after income taxes, or $0.04 per share) in Selling, general and administrative expenses. During the six months ended June, 2020, the company recorded severance expenses in Cost of goods sold, Selling, general and administrative expenses and Net income attributable to noncontrolling interest of $0.7 million, $8.2 million and a $0.3 million gain ($6.2 million after income taxes, or $0.06 per share), respectively. The balance of unpaid severance is recorded in Accrued expenses and is expected to primarily be paid through 2021.

(2)

Costs related to the acquisition, integration and potential divestitures of various significant projects, recorded in Selling, general and administrative expenses for the three and six months ended June 30, 2021 were $1.9 million and $4.1 million ($1.5 million and $3.2 million after income taxes, or $0.01 and $0.03 per share), respectively, and for the three and six months ended June 30, 2020 were $5.5 million and $8.4 million ($4.2 million and $6.5 million after income taxes, or $0.04 and $0.06 per share), respectively.

(3)

Included in Selling, general and administrative expenses for the three and six months ended June 30, 2021 is a charitable contribution of $20.0 million ($15.5 million after income taxes, or $0.13 per share), using a portion of the proceeds received from the FCS divestiture, to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where Albemarle’s employees live and the company operates. This contribution is in addition to the normal annual contribution made to the Albemarle Foundation by the company, and is significant in size and nature in that it is intended to provide more long-term benefits in these communities.

(4)

Included in Gain on sale of business, for the three and six months ended June 30, 2021 is $429.4 million ($331.6 million after discrete income taxes, or $2.87 per share) related to the sale of the FCS business.

(5)

Included in Interest and financing expenses for the three and six months ended June 30, 2021 is a loss on early extinguishment of debt of $1.2 million and $29.0 million ($0.8 million and $23.8 million after income taxes, or $0.01 and $0.21 per share), respectively, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of $1.5 billion in debt using the proceeds from the issuance of common stock.

(6)

Other adjustments for the three months ended June 30, 2021 included amounts recorded in:

•

Selling, general and administrative expenses – $4.0 million of a loss resulting from the sale of property, plant and equipment, $1.6 million of charges for an environmental reserve at a site not part of the company’s operations and $1.4 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements.

•

Other income, net – $0.3 million of a gain resulting from the adjustment of indemnification obligations related to previously disposed businesses.

After income taxes, these charges totaled $4.9 million, or $0.04 per share.

Other adjustments for the six months ended June 30, 2021 included amounts recorded in:

•

Selling, general and administrative expenses – $6.0 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements, a $4.0 million loss resulting from the sale of property, plant and equipment and $1.6 million of charges for an environmental reserve at a site not part of the company’s operations.

•

Other income, net – $3.6 million of expenses primarily related to asset retirement obligation charges to update an estimate at a site formerly owned by Albemarle.

After income taxes, these charges totaled $11.4 million, or $0.10 per share.

Other adjustments for the three months ended June 30, 2020 included amounts recorded in:

•

Other expenses, net – $0.9 million ($0.6 million after income taxes, or $0.01 per share) net gain primarily relating to the sale of idle properties in Germany.

Other adjustments for the six months ended June 30, 2020 included amounts recorded in:

•

Other expenses, net – $2.7 million gain resulting from the settlement of a legal matter related to a business sold and $0.8 million net gain primarily relating to the sale of idle properties in Germany, partially offset by a $0.8 million loss resulting from the adjustment of indemnifications related to previously disposed businesses.

After income taxes, these net gains totaled $1.7 million, or $0.02 per share.

(7)

Included in Income tax expense for the three and six months ended June 30, 2021 are discrete net tax benefits of $7.6 million, or $0.06 per share and $6.6 million, or $0.06 per share, respectively. The net benefit for the three months is primarily related to excess tax benefits realized from stock-based compensation arrangements and the revaluation of deferred taxes due to tax rate changes. The net benefit for the six months is primarily related to the release of a foreign valuation allowance, excess tax benefits realized from stock-based compensation arrangements, and the revaluation of deferred taxes due to tax rate changes, partially offset by tax expense due to an out-of-period adjustment regarding an overstated deferred tax liability for the three-month period ended December 31, 2017.

Included in Income tax expense for the three and six months ended June 30, 2020 are discrete net tax benefits of $0.5 million, or less than $0.01 per share, and $1.6 million, or $0.01 per share. The net benefit for the three months is primarily related to lapses in statute of limitations. The net benefit for the six months is primarily related to excess tax benefits realized from stock-based compensation arrangements.

 

See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).


Income before
income taxes and
equity in net income
of unconsolidated
investments


Income tax
expense


Effective income
tax rate


Three months ended June 30, 2021

As reported

$

535,195

$

106,985

20.0

%

Non-recurring, other unusual and non-operating pension and OPEB items

(404,383)

(84,114)

As adjusted

$

130,812

$

22,871

17.5

%


Three months ended June 30, 2020

As reported

$

88,075

$

15,431

17.5

%

Non-recurring, other unusual and non-operating pension and OPEB items

8,445

2,837

As adjusted

$

96,520

$

18,268

18.9

%


Six months ended June 30, 2021

As reported

$

658,489

$

129,092

19.6

%

Non-recurring, other unusual and non-operating pension and OPEB items

(370,457)

(78,682)

As adjusted

$

288,032

$

50,410

17.5

%


Six months ended June 30, 2020

As reported

$

203,548

$

33,873

16.6

%

Non-recurring, other unusual and non-operating pension and OPEB items

8,906

3,795

As adjusted

$

212,454

$

37,668

17.7

%

 

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SOURCE Albemarle Corporation

Posted on

Aaron’s Directors Declare Cash Dividend

PR Newswire

ATLANTA, Aug. 4, 2021 /PRNewswire/ — The Aaron’s Company, Inc. (NYSE: AAN), a leading, technology-enabled, omnichannel provider of lease-to-own and purchase solutions, today announced that its Board of Directors has declared a regular quarterly cash dividend of $0.10 per share and declared such dividend payable October 5, 2021, to shareholders of record as of the close of business on September 16, 2021. 

About Aaron’s
Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN), is a leading, technology-enabled, omnichannel provider of lease-to-own and purchase solutions. Aaron’s engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, appliances, and accessories through its approximately 1,300 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. For more information, visit investor.aarons.com or Aarons.com.

 

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SOURCE The Aaron’s Company, Inc.

Posted on

Universal Corporation Announces Quarterly Dividend

PR Newswire

RICHMOND, Va., Aug. 4, 2021 /PRNewswire/ — George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE:UVV), announced today that the Company’s Board of Directors declared a quarterly dividend of seventy-eight cents($0.78) per share on the common shares of the Company, payable November 1, 2021, to common shareholders of record at the close of business on October 11, 2021.  

Universal Corporation (NYSE: UVV), headquartered in Richmond, Virginia, is a global business-to-business agri-products supplier to consumer product manufacturers, operating in over 30 countries on five continents, that sources and processes leaf tobacco and plant-based ingredients. Tobacco has been the Company’s principal focus since its founding in 1918, and Universal is the leading global leaf tobacco supplier. Through the Company’s plant-based ingredients platform, it provides a variety of value-added manufacturing processes to produce high-quality, specialty vegetable- and fruit-based ingredients for the food and beverage end markets. Universal has been finding innovative solutions to serve its customers and meet their agri-product needs for more than 100 years. The Company’s revenues for the fiscal year ended March 31, 2021, were $2.0 billion. Visit www.universalcorp.com for more information on Universal Corporation and the latest Company news.

     

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SOURCE Universal Corporation

Posted on

Trecora Resources Announces Second Quarter 2021 Results

— Second quarter net income and Adjusted EBITDA increased year-over-year due to economic recovery and strong demand from end-use markets

— Second quarter net income from continuing operations of $2.3 million compared to net loss from continuing operations of $1.9 million in the second quarter of 2020

— Second quarter Adjusted EBITDA from continuing operations of $8.1 million compared to Adjusted EBITDA from continuing operations of $4.2 million in the second quarter of 2020, driven by sharply improved results for both Specialty Petrochemicals and Specialty Waxes

— Repurchased 633,273 shares year-to-date, or approximately $5 million, under $20 million share repurchase authorization

— Strong balance sheet with ample liquidity to fund growth initiatives

— Conference call at 10:00 am ET, August 5, 2021

PR Newswire

SUGAR LAND, Texas, Aug. 4, 2021 /PRNewswire/ — Trecora Resources (“Trecora” or the “Company”) (NYSE: TREC), a leading provider of specialty hydrocarbons and specialty waxes, today announced financial results for the second quarter ended June 30, 2021.

Executive Commentary

“We delivered strong top and bottom line growth in the second quarter of 2021 as compared to the same period last year,” stated Pat Quarles, Trecora’s President and Chief Executive Officer. “The reopening of economies and an improving macroeconomic environment in the United States led to a significant improvement in demand across all of our end-markets, particularly for our prime products and waxes. This quarter demonstrates the strength of our business model as the economy continues to recover from the pandemic impacts and our industry recovers from the Texas freeze event in February. Product revenues for our Specialty Waxes segment were up 26.1% year-over-year, primarily reflecting increases in wax pricing. For our Specialty Petrochemicals segment, an 84.9% year-over-year increase in product revenues was driven by strong sales volumes as well as higher product prices. These factors led to second quarter net income from continuing operations of approximately $2.3 million and Adjusted EBITDA from continuing operations of $8.1 million, nearly doubling last year’s second quarter Adjusted EBITDA.”

“We continue to focus on maintaining a strong balance sheet and delivering on our organic growth programs while seeking additional external opportunites to grow. In every instance, we are commited to increasing our earnings and cashflow and creating long-term value for our stockholders. As part of that commitment, during the quarter we completed the repurchase of $5 million of shares of the $20 million authorization from our Board,” concluded Mr. Quarles.

Sami Ahmad, Trecora’s Chief Financial Officer stated, “Our enhanced operational efficiencies and strong competitive positioning, coupled with improving execution at Trecora Chemical, enabled us to capitalize on the economic upturn and generate improved profitability in the second quarter. Cash used in operations in the second quarter was $4.3 million as the growth in the business resulted in an increase in working capital of nearly $16 million. We are extremely confident in our liquidity position, with cash at the end of the quarter of $39.1 million, and an undrawn revolver. Total bank debt at the end of the quarter was $44.0 million. The strength of our balance sheet affords us a great amount of financial flexibility to manage our business and execute on our strategic plan,” concluded Mr. Ahmad.

Second Quarter 2021 Financial Results

Net income in the second quarter of 2021 was $2.3 million, or $0.09 per diluted share[1], compared to net loss of $1.9 million, or $(0.07) per diluted share[2], in the second quarter of 2020. Adjusted EBITDA from continuing operations was $8.1 million for the second quarter of 2021, compared with Adjusted EBITDA from continuing operations of $4.2 million in the second quarter of 2020.

Total revenue in the second quarter of 2021 was $68.8 million, compared to $40.7 million in the second quarter of 2020. This 69.3% year-over-year increase was primarily due to higher sales volumes and selling prices as reopening trends and economic recovery continue, leading to greater demand in our end-markets.

Gross profit in the second quarter of 2021 was $11.0 million, or 16.0% of total revenues, compared to $6.2 million, or 15.2% of total revenues in the second quarter of 2020. Operating income in the second quarter of 2021 was $3.1 million, compared to operating loss of $0.3 million in the second quarter of 2020.

Specialty Petrochemicals

Specialty Petrochemicals net income was $5.3 million in the second quarter of 2021, compared to net income of $1.4 million in the second quarter of 2020, including the benefit of $1.4 million settlement with a utility provider for costs related to the Texas freeze event. Specialty Petrochemicals volume in the second quarter of 2021 was 20.0 million gallons, compared to 17.2 million gallons in the first quarter of 2021 and 15.3 million gallons in the second quarter of 2020. Sales revenues for our Specialty Petrochemicals products increased 84.9% year-over-year.  This was  primarily due to the economic recovery which resulted in  greater demand for our products as well as higher product prices.

Prime product volume in the second quarter of 2021 was 16.9 million gallons, compared to 14.7 million gallons in the first quarter of 2021 and 13.1 million gallons in the second quarter of 2020. By-product sales volume was 3.1 million gallons in the second quarter of 2021. Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the second quarter of 2021 was $9.7 million, compared to $5.0 million in the second quarter of 2020.


Dollar amounts in thousands/rounding may apply


THREE MONTHS
ENDED


JUNE 30
,



2021



2020



% Change

 Product sales

$57,763

$31,236

85%

 Processing fees


1,527


1,159

32%

 Gross revenues

$59,290

$32,395

83%

 Operating profit before depreciation and amortization

9,741

4,974

96%

 Operating profit

6,955

2,354

196%

 Net profit before taxes

6,709

1,648

307%

 Depreciation and amortization

2,787

2,621

6%

 Adjusted EBITDA

9,737

4,998

95%

 Capital expenditures

3,692

5,382

(31%)

Specialty Waxes

Specialty Waxes generated revenues of approximately $9.6 million in the second quarter of 2021, a $0.9 million increase from $8.7 million in the first quarter of 2021, and a $1.3 million increase from the second quarter of 2020. Revenues included approximately $6.9 million of wax product sales in the second quarter of 2021, 26.1% higher than the same quarter last year, due to higher selling prices; average selling prices for our specialty waxes increased by more than 20%. Wax sales volumes increased approximately 5.2% from the second quarter of 2020.

Adjusted EBITDA for Specialty Waxes in the second quarter of 2021 was $1.3 million, compared to $0.9 million in the second quarter of 2020. Specialty Waxes net loss was $0.2 million in the second quarter of 2021, compared to net loss of $0.3 million in the second quarter of 2020.

Processing fees, which were approximately $2.7 million in the second quarter of 2021, a decrease of 5.2%, or approximately $0.1 million, from the second quarter of 2020. The decline was due to customer supply chain disruptions combined with residual impacts from the Texas freeze event which caused the ramp up on new custom processing projects to take longer than expected.


Dollar amounts in thousands/rounding may apply


THREE MONTHS
ENDED


 JUNE 30,



2021



2020



% Change

 Product sales

$6,897

$5,471

26%

 Processing fees


2,662


2,808

(5%)

 Gross revenues

$9,559

$8,279

16%

 Operating profit before depreciation and amortization

1,321

854

55%

 Operating loss

(198)

(485)

59%

 Net loss before taxes

(184)

(445)

59%

 Depreciation and amortization

1,518

1,338

14%

 Adjusted EBITDA

1,336

892

50%

 Capital expenditures

191

285

(33%)

First Half 2021 Financial Results

Net loss from continuing operations in the first half of 2021 was $2.1 million, or $(0.09) per diluted share[3], compared to net income from continuing operations of $4.0 million, or $0.16 per diluted share[4], for the same period in 2020. The first half of 2021 included the negative impact of the Texas freeze event in February, estimated to be $3.5 million, while the first half of 2020 included an income tax benefit of $4.8 million. Adjusted EBITDA from continuing operations in the first half of 2021 was $7.6 million, compared to Adjusted EBITDA from continuing operations of $9.7 million for the same period in 2020.

Total revenue in the first half of 2021 was $123.4 million, compared to $102.7 million for the same period in 2020, an increase of 20.1%. This increase was primarily due to higher sales volumes and higher selling prices as a result of the economic recovery from COVID-19 and increased costs of natural gasoline.

Gross profit in the first half of 2021 was $13.4 million, or 10.8% of total revenues, compared to $14.2 million, or 13.9% of total revenues, for the same period in 2020. Operating loss in the first half of 2021 was $2.1 million, compared to operating income of $0.9 million for the same period in 2020.

Specialty Petrochemicals

Specialty Petrochemicals net income was $5.5 million in the first half of 2021, compared to net income of $6.0 million for the same period in 2020. Specialty Petrochemicals volume in the first half of 2021 was 37.2 million gallons, compared to 35.1 million gallons for the same period in 2020. Prime product volume in the first half of 2021 was 31.5 million gallons, compared to 29.3 million gallons in the same period 2020. Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the first half of 2021 increased 7.3% to $12.3 million, compared to $11.5 million for the same period in 2020.


Dollar amounts in thousands/rounding may apply 


SIX MONTHS


ENDED


JUNE 30
,



2021



2020



 % Change
 

 Product sales 

$102,421

$81,622

26%

 Processing fees 


2,781


2,403

16%

 Gross revenues 

$105,202

$84,025

25%

 Operating profit before depreciation and amortization 

12,312

11,464

7%

 Operating profit 

6,724

6,226

8%

 Net profit before taxes 

6,412

4,590

40%

 Depreciation and amortization 

5,589

5,238

7%

 Adjusted EBITDA from continuing operations

12,307

11,471

7%

 Capital expenditures 

7,259

6,983

4%

Specialty Waxes 

Specialty Waxes net loss of $2.1 million in the first half of 2021 compared to net income of $0.9 million for the same period in 2020. Specialty Waxes had revenues of $18.2 million in the first half of 2021, a 2.6% decrease from the same period of 2020. Revenues included $13.8 million of wax product sales and $4.4 million of processing revenues. Wax sales volumes in the first half of 2021 decreased approximately 4.9% from the same period in 2020. In the first half of 2021, the Texas freeze event impacted both wax production and the custom processing business. Adjusted EBITDA from continuing operations for Specialty Waxes in the first half of 2021 was $0.9 million, compared to $2.0 million for the same period in 2020.


Dollar amounts in thousands/rounding may apply 


SIX MONTHS
ENDED


JUNE 30
,



2021



2020



 % Change
 

 Product sales 

$13,804

$12,268

13%

 Processing fees 


4,428


6,448

(31%)

 Gross revenues 

$18,232

$18,716

(3%)

 Operating profit before depreciation and amortization 

840

1,920

(56%)

 Operating loss 

(2,155)

(747)

(189%)

 Net loss before taxes 

(2,138)

(687)

(211%)

 Depreciation and amortization 

2,994

2,666

12%

 Adjusted EBITDA from continuing operations

857

1,996

(57%)

 Capital expenditures 

1,405

601

134%

Outlook

“In the second quarter we saw a very strong resurgence of demand due both to the continued recovery from the pandemic and the pent-up demand as a result of the Texas freeze event in February. The demand improvement allowed us to realize price increases across our entire product offering. Some of these benefits were muted by supply chain disruptions both with our suppliers and service providers. While some issues remain, we took positive steps to mitigate impacts to our customers by expanding our owned trucking fleet and extending our third party trucking network.

“Demand in the third quarter remains strong reflecting the general economy and likely some inventory building in the supply chain as our customers deal with their own supply chain issues. We also continue to advance our organic growth program with two new commercial trials expected in the quarter. Benefits from restructuring acitivies in our South Hampton product handling function will reduce our costs in the second half of the year. Continued increases in the price of natural gasoline are also impacting margins on our market-based prime products.

“The second quarter was one of major progress at Trecora and we continue to believe that with an improving economic environment, increasing levels of vaccinations, and activity levels increasing in our end-markets, we expect to drive sustainable profitability in the quarters to come. The improvements that we have made in our company make us very confident about our progress and outlook for the second half of 2021,” concluded Mr. Quarles.

Earnings Call

Tomorrow’s conference call, on August 5, 2021 at 10:00 am Eastern Time, will be simulcast live on the Internet, and can be accessed on the investor relations section of the Company’s website at http://www.trecora.com/ or at https://edge.media-server.com/mmc/p/zcza6anf. A replay of the call will also be available through the same link until October 5, 2021.

To participate via telephone, callers should dial in at least ten to fifteen minutes prior to the 10:00 am Eastern Time start; domestic callers (U.S. and Canada) should call +1-866-417-5724 or +1-409-217-8234 if calling internationally, using the conference ID 9462308. To listen to the playback, please call 1-855-859-2056 if calling within the United States or 1-404-537-3406 if calling internationally. Use pin number 9462308 for the replay.

Use of Non-GAAP Measures

This earnings press release includes non-GAAP financial measures of EBITDA from continuing operations and Adjusted EBITDA from continuing operations and provide reconciliations from our most directly comparable GAAP financial measures to those measures.

We believe these financial measures provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We also believe that such non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. These measures are not measures of financial performance or liquidity under GAAP and should be considered in addition to, and not as a substitute for, analysis of our results under GAAP.

We define EBITDA from continuing operations as net income (loss) from continuing operations plus interest expense, income tax expense (benefit), and depreciation and amortization. We define Adjusted EBITDA from continuing operations as EBITDA from continuing operations plus share-based compensation and plus or minus gains or losses on disposal of assets.

Forward-Looking Statements

Some of the statements and information contained in this earnings press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding the Company’s financial position, business strategy and plans and objectives of the Company’s management for future operations and other statements that are not historical facts, are forward-looking statements. Forward-looking statements are often characterized by the use of words such as “outlook,” “may,” “will,” “can,” “shall,” “should,” “could,” “expects,” “plans,” “anticipates,” “contemplates,” “proposes,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue,” “intend,” or the negative of such terms and other comparable terminology, or by discussions of strategy, plans or intentions.

Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause the actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and factors include, but are not limited to the impacts of the COVID-19 pandemic on our business, financial results and financial condition and that of our customers, suppliers, and other counterparties; general economic and financial conditions domestically and internationally; insufficient cash flows from operating activities; our ability to attract and retain key employees; feedstock and product prices; feedstock availability and our ability to access third party transportation; competition; industry cycles; natural disasters or other severe weather events (such as the Texas freeze event), health epidemics and pandemics (including the COVID-19 pandemic) and terrorist attacks; our ability to consummate extraordinary transactions, including acquisitions and dispositions, and realize the financial and strategic goals of such transactions; technological developments and our ability to maintain, expand and upgrade our facilities; regulatory changes; environmental matters; lawsuits; outstanding debt and other financial and legal obligations (including having to return the amounts borrowed under the PPP Loans or failing to qualify for forgiveness of such loans, in whole or in part); difficulties in obtaining additional financing on favorable conditions, or at all; local business risks in foreign countries, including civil unrest and military or political conflict, local regulatory and legal environments and foreign currency fluctuations; and other risks detailed in our latest Annual Report on Form 10-K, including, but not limited to, “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” therein, and in our other filings with the Securities and Exchange Commission (the “SEC”). Many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic and other natural disasters such as severe weather events.

There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements. In addition, to the extent any inconsistency or conflict exists between the information included in this release and the information included in our prior releases, reports and other filings with the SEC, the information contained in this release updates and supersedes such information.

Forward-looking statements are based on current plans, estimates, assumptions and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

About Trecora Resources (TREC)

TREC owns and operates a specialty petrochemicals facility specializing in high purity hydrocarbons and other petrochemical manufacturing and a specialty wax facility, both located in Texas, and provides custom processing services at both facilities.

Investor Relations Contact: The Equity Group Inc.

Fred Buonocore, CFA

(212) 836-9607


[email protected]

Mike Gaudreau

(212) 836-9620


[email protected]

 

TRECORA RESOURCES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


June 30, 2021


December 31,
2020



ASSETS


(thousands of dollars, except par value)


Current Assets

Cash

$       39,125

$       55,664

Trade receivables, net

34,210

25,301

Inventories

15,640

12,945

Prepaid expenses and other assets

5,094

9,198

Taxes receivable

286

2,788

Total current assets

94,355

105,896


 Plant, pipeline and equipment, net

188,109

187,104


Intangible assets, net

11,972

12,893


Lease right-of-use assets, net

8,962

10,528


Mineral properties

412

412


TOTAL ASSETS

$     303,810

$     316,833



LIABILITIES


Current Liabilities

Accounts payable

$       11,488

$       14,447

Accrued liabilities

7,388

6,857

Current portion of long-term debt

4,194

4,194

Current portion of lease liabilities

3,244

3,195

Current portion of CARES Act, PPP Loans

6,123

–

Current portion of other liabilities

569

891

Total current liabilities

33,006

29,584


CARES Act, PPP Loans, net of current portion

–

6,123


Long-term debt, net of current portion

39,804

41,901


Post-retirement benefit, net of current portion

316

320


Lease liablities, net of current portion

5,718

7,333


Other liabilities, net of current portion

626

648


Deferred income taxes

26,241

26,517


Total liabilities

105,711

112,426



EQUITY


Common stock – authorized 40 million shares of $0.10 par value; issued
24.4 million and 24.8 million and outstanding 23.8 million and 24.8 million in
2021 and 2020, respectively

2,497

2,483


Additional paid-in capital

62,138

61,311


Treasury stock, at cost (0.6 million shares)

(5,000)

–


Retained earnings

138,175

140,324

Total Trecora Resources Stockholders’ Equity

197,810

204,118

Noncontrolling Interest

289

289


Total equity

198,099

204,407


TOTAL LIABILITIES AND EQUITY

$    303,810

$     316,833

 

 

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


THREE MONTHS ENDED


SIX MONTHS ENDED


JUNE 30,


JUNE 30,



(unaudited)



(unaudited)


2021


2020


2021


2020


(thousands of dollars, except per share amounts)

Revenues

Product sales

$      64,660

$     36,707

$   116,225

$     93,890

Processing fees

4,189

3,967

7,209

8,851

68,849

40,674

123,434

102,741

Operating costs and expenses

Cost of sales and processing (including depreciation and
amortization of $4,082, $3,750, $8,137 and $7,486,
respectively)

57,828

34,507

110,068

88,496

Gross Profit

11,021

6,167

13,366

14,245

General and Administrative Expenses

General and administrative

7,673

6,289

15,005

12,963

Depreciation

226

212

452

428

7,899

6,501

15,457

13,391

Operating income (loss)

3,122

(334)

(2,091)

854

Other income (expense)

Interest expense

(297)

(735)

(599)

(1,651)

Miscellaneous income, net

133

68

243

6

(164)

(667)

(356)

(1,645)

Income (loss) from continuing operations before income taxes

2,958

(1,001)

(2,447)

(791)

Income tax (expense) benefit

(703)

(858)

298

4,795

Income (loss) from continuing operations

2,255

(1,859)

(2,149)

4,004

Income (loss) from discontinued operations, net of tax

–

(2)

–

4,855

Net income (loss)

$       2,255

$ (1,861)

$ (2,149)

$        8,859

Basic earnings (loss) per common share

Net income (loss) from continuing operations (dollars)

$         0.09

$       (0.07)

$        (0.09)

$        0.16

Net income from discontinued operations, net of tax (dollars)

–

–

–

0.20

Net income (loss) (dollars)

$         0.09

$        (0.07)

$        (0.09)

$         0.36

Basic weighted average number of common shares
outstanding

24,485

24,802

24,673

24,784

Diluted earnings (loss) per common share

Net income (loss) from continuing operations (dollars)

$         0.09

$       (0.07)

$       (0.09)

$         0.16

Net income from discontinued operations, net of tax (dollars)

–

–

–

0.19

Net income (loss) (dollars)

$        0.09

$       (0.07)

$        (0.09)

$         0.35

Diluted weighted average number of common shares
outstanding

25,097

24,802

24,673

25,327

TRECORA RESOURCES AND SUBSIDIARIES

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

EBITDA from continuing operations and Adjusted EBITDA from continuing operations

(thousands of dollars; rounding may apply)



THREE MONTHS ENDED



THREE MONTHS ENDED



6/30/2021



6/30/2020

SPEC. PETRO

SPEC. WAX

CORP

TREC

SPEC. PETRO

SPEC. WAX

CORP

TREC

NET INCOME (LOSS)

$       5,286

$     (183)

$ (2,848)

$ 2,255

$       1,393

$     (332)

$(2,922)

$(1,861)

Income from discontinued operations, net of
tax

–

–

–

–

–

–

(2)

(2)

Income (Loss) from continuing operations *

$       5,286

$     (183)

$ (2,848)

$ 2,255

$       1,393

$     (332)

$(2,920)

$(1,859)

Interest expense

297

–

–

297

736

–

(1)

735

Income tax expense (benefit)

1,406

–

(703)

703

255

(113)

716

858

Depreciation and amortization

200

23

3

226

185

23

4

212

Depreciation and amortization in cost of
sales

2,586

1,496

–

4,082

2,436

1,314

–

3,750

EBITDA from continuing operations *

9,775

1,336

(3,548)

7,563

5,005

892

(2,201)

3,696

Stock-based compensation

–

–

552

552

–

–

543

543

Gain on disposal of assets

(38)

–

–

(38)

(7)

–

–

(7)

Adjusted EBITDA from continuing
operations *

$      9,737

$  1,336

$ (2,996)

$  8,077

$       4,998

$     892

$(1,658)

$ 4,232



SIX MONTHS ENDED



SIX MONTHS ENDED



6/30/2021



6/30/2020

SPEC. PETRO

SPEC. WAX

CORP

TREC

SPEC. PETRO

SPEC. WAX

CORP

TREC

NET INCOME (LOSS)

$       5,491

$  (2,137)

$ (5,503)

$(2,149)

$       5,989

$      882

$ 1,988

$ 8,859

Income from discontinued operations, net of
tax

–

–

–

–

–

–

4,855

4,855

Income (Loss) from continuing operations *

$       5,491

$  (2,137)

$ (5,503)

$(2,149)

$       5,989

$      882

$(2,867)

$ 4,004

Interest expense

599

–

–

599

1,651

–

–

1,651

Income tax expense (benefit)

920

–

(1,218)

(298)

(1,399)

(1,569)

(1,827)

(4,795)

Depreciation and amortization

400

46

6

452

371

47

10

428

Depreciation and amortization in cost of
sales

5,189

2,948

–

8,137

4,867

2,619

–

7,486

EBITDA from continuing operations *

12,599

857

(6,715)

6,741

11,479

1,979

(4,684)

8,774

Share based compensation

–

–

1,123

1,123

–

–

933

933

(Gain) Loss on disposal of assets

(292)

–

–

(292)

(8)

17

–

9

Adjusted EBITDA from continuing
operations *

$    12,307

$     857

$ (5,592)

$  7,572

$    11,471

$  1,996

$(3,751)

$  9,716

* Discontinued Operations only applicable within the Corporate segment

 

__________
1 Based on 25.1 million shares outstanding.
2 Based on 24.8 million shares outstanding.
3 Based on 24.7 million shares outstanding.
4 Based on 25.3 million shares outstanding.

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SOURCE Trecora Resources